Decision Making - PowerPoint PPT Presentation

Loading...

PPT – Decision Making PowerPoint presentation | free to download - id: 3afee5-ODJjM



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Decision Making

Description:

Decision Making BUSINESS Introduction Making decisions under conditions of risk and uncertainty is one of the most important activities that managers engage in. – PowerPoint PPT presentation

Number of Views:9173
Avg rating:3.0/5.0
Slides: 99
Provided by: kieffComg
Learn more at: http://www.kieff.com
Category:
Tags: decision | making

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Decision Making


1
Chapter 6
Decision Making
2
BUSINESS
  • the art of making irrevocable decisions based on
    insufficient knowledge

3
Introduction
  • Making decisions under conditions of risk and
    uncertainty is one of the most important
    activities that managers engage in.
  • Generally, there is a lack of information and a
    limited amount of time available to make the
    decision.
  • Procrastinating and not making a decision
    sometimes has greater risk than making it.

4
Decision Making
  • The process of identifying problems and
    opportunities and resolving them.
  • Management decisions can be made by managers,
    teams, or individual employees, depending on
  • The scope of the decision, and
  • The design and structure of the organization.

5
Managerial Decision Making
Choice from available alternatives
Decision
The process through which managers identify and
resolve problems and capitalize on opportunities.
Decision Making
6
Characteristics of management decision making
Programmability
Decision Scope
Uncertainty
Conflict
Risk
7
Types of Decisions
Nonprogrammed Decisions
Programmed Decisions
Sick leave
Involve situations that have occurred often and
decision rules can be developed and applied
Decisions required for unique and complex
management problems.
Poorly defined Largely unstructured Important
consequences Uncertainty is great Routine
decision rules for solving the problem do not
exist.
Managers formulate decision rules so subordinates
can make decisions freeing managers for other
tasks.
8
Certainty, Risk Uncertaintyand Ambiguity
All the information
Organizational Problem
Know Objectives Dont Know Probabilities
Low Certainty
Risk
Uncertainty
High Ambiguity
Possibility of Failure

Programmed Decisions

Nonprogrammed Decisions
Clear-cut objectives Know the probabilities
Objectives Unclear Outcomes Unclear
Problem Solution
9
Stages of Decision Making
Identifying and diagnosing the problem
Generating alternative solutions
Selecting the best alternative
Evaluating alternatives
Implementing the decision
Evaluating the decision
10
Steps in the Decision-Making Process
Ignore
Recognize
Diagnosis and fact gathering
Identifying problems and opportunities
WHO
Symptoms
Change
Revise
SUG
Consistency
Establishing specific goals and objectives and
Specific, Measurable, Attainable
Revise
Dont evaluate
Generating Alternatives
Quantity
Brainstorming
Revise
Evaluation Alternatives
Establish criteria
Revise
Selecting the best Alternative
Goals
Who What Where When Verify
Revise
Implementing the Decision
Action Plan
Revise
Decision Process
Monitoring Evaluating the Decision
Did It Work?
Follow up Plan
11
Steps in the Decision-Making Process Slide 1 of 7
  • Step 1 Identifying Opportunities and Diagnosing
    Problems
  • The first step in the decision making process is
    the clear identification of opportunities or the
    diagnosis of problems that require a decision.
  • An assessment of opportunities and problems will
    only be as accurate as the information on which
    it is based.

12
Steps in the Decision-Making Process Slide 2 of 7
  • Step 2 Identifying Objectives
  • Objectives reflect the results the organization
    wants to attain.
  • Both the quantity and quality of the desired
    results should be specified, for these aspects of
    the objectives will ultimately guide the decision
    maker in selecting the appropriate course of
    action.

13
Decision criteria to evaluate alternative
solutions
  • Decision criteria should be related to the
    performance goals of the organization and its
    subunits.
  • Decision criteria can include
  • Costs
  • Profits
  • Timeliness
  • Whether the decision will work
  • Fairness

14
Decision Criteria (continued)
  • A practical way to apply decision criteria is to
    consider
  • Decision quality aspect of decision making
    based on such facts as costs, revenues, and
    product design specifications.
  • Decision acceptance aspect of decision making
    based on peoples feelings.

15
Steps in the Decision-Making Process Slide 3 of 7
  • Step 3 Generating Alternatives
  • Once an opportunity has been identified or a
    problem diagnosed correctly, a manager develops
    various ways to solve the problem and achieve
    objectives.
  • The alternatives can be standard and obvious as
    well as innovative and unique.

16
Steps in the Decision-Making Process Slide 4 of 7
  • Step 4 Evaluating Alternatives
  • The fourth step in the decision-making process
    involves determining the value or adequacy of the
    alternatives generated.
  • Predetermined decision criteria such as the
    quality desired, anticipated costs, benefits,
    uncertainties, and risks of each alternative may
    be used in the evaluation process.

17
Approaches to selecting the best alternative
  • Optimizing selecting the best alternative from
    among multiple criteria.
  • Satisficing selecting the first alternative
    solution that meets a minimum criterion.

18
Steps in the Decision-Making Process Slide 5 of 7
  • Step 5 Reaching Decisions
  • Decision making is commonly associated with
    making a final choice.
  • Although choosing an alternative would seem to be
    a straightforward proposition, in reality the
    choice is rarely clear-cut.

19
Steps in the Decision-Making Process Slide 6 of 7
  • Step 6 Choosing Implementation Strategies
  • The bridge between reaching a decision and
    evaluating the results is the implementation
    phase of the decision-making process.
  • The keys to effective implementation are
  • Sensitivity to those who will be affected by the
    decision.
  • Proper planning and consideration of the
    resources necessary to carry out the decision.

20
Steps in the Decision-Making Process Slide 7 of 7
  • Step 7 Monitoring and Evaluating
  • No decision-making process is complete until the
    impact of the decision has been evaluated.
  • Managers must observe the impact of the decision
    as objectively as possible and take further
    corrective action if it becomes necessary.

21
Models of Decision Making
  • Rational-Economic Model
  • Behavioral Decision Model

A prescriptive framework of how a decision should
be made that assumes managers have completely
accurate information.
Unlike the rational-economic model, the
behavioral decision-making model acknowledges
human limitations that make rational decisions
difficult to achieve.
22
Assumptions of the rational decision making
process
  • The problem is clear and unambiguous.
  • There is a single, well-defined goal that all
    parties agree to.
  • Full information is available about criteria.
  • All the alternatives and their consequences are
    known.
  • The decision preferences are clear.
  • There are no time and cost constraints affecting
    the decision.
  • The decision solution will maximize the economic
    payoff.

NOT USUALLY THE CASE
23
Rational-Economic Model
  • Concentrates on how decisions should be made, not
    on how they actually are made
  • The model is based on the following assumptions
  • Managers have perfect information.
  • Managers attempt to accomplish objectives that
    are known and agreed upon and have an extensive
    list of alternatives from which to choose.

24
Rational-Economic Model
  • Assumptions of Rational-Economic Model
    (continued)
  • Managers are rational, systematic, and logical in
    assessing alternatives and their associated
    probabilities.
  • Managers work in the best interests of their
    organizations.
  • Ethical decisions do not arise in the
    decision-making process.

25
Rational-Economic Model
  • Conclusion
  • As these assumptions suggest, the
    rational-economic model does not address the
    influences that affect decision environments or
    describe how managers actually make decisions.
  • As a consequence, in practice the model may not
    always be a realistic depiction of managerial
    behavior.

26
Behavioral Decision Model
  • Unlike the rational-economic model, the
    behavioral decision model acknowledges human
    limitations.
  • The behavioral decision model suggests that a
    persons cognitive ability to process information
    is limited.

27
Factors that limit rational decision making
Escalation of Commitment
Organization Politics
The tendency to increase commitment to a
previously selected course of action.
Emotions and Personal Preferences
Illusion of Control
28
Behavioral Influence on Decision Making
  • Perception A person's view of the world
  • Stereotyping - projecting characteristics of a
    small number of people as characteristics of
    the entire group
  • Halo Effect - one characteristic overshadows
    all other characteristics or aspects of the
    decision
  • Subjective Rationality - Thinking logically but
    within one's own framework
  • Bounded Rationality - personal, environmental,
    time, and organizational constraints
    which place limits on decisions

29
Behavioral Influence on Decision Making
  • Recency - tendency to ascribe more importance to
    things that happened most recently
  • Satisficing - tendency to accept "adequate"
    decision instead of the best
  • Values
  • Personality
  • Propensity For Risk

30
The Garbage Can Model of Decision-Making
Organized Anarchy
Streams of events Compose of problems, solutions,
participants, choices When they connect a
decision gets made
Problems
Solutions
Middle Management
Causes Goals unclear Cause and effect
undefined High turnover
Problems Solutions Choice Opportunities Participa
nts
Participants
Participants
Choice Opportunities
Choice Opportunities
Solutions
Department A
Department B
Problems Solutions Choice Opportunities Participa
nts
Problems Solutions Choice Opportunities Participa
nts
Choice Opportunities
Problems
Participants
Solutions
Problems
Problems
Solutions
Participants
Participants
31
  • Garbage Can Model
  • This model suggests that managers have a set of
    preestablished solutions to problems located in
    garbage cans.
  • The garbage can model is likely to be used when
    decision makers are undisciplined and have no
    clear immediate goals.
  • The decision making process lacks structure
  • This can lead to serious difficulties

32
Leader decision making Styles
  • Decide and persuade
  • Discover facts and decide
  • Consult and decide
  • Consult with group and decide
  • Group decision

33
Probable Relationship Between Quality of Decision
and Method Utilized
Quality of Decision
More
Less
Average individual
Minority control
Majority control
Individual
Consensus
34
Group Considerations in Decision Making
Group decision making is becoming more common as
organizations focus on improving customer service
and push decision making to lower levels.
35
Impact of Group Size on Participation in Decision
Making
In deciding whether a participative model of
decision making is appropriate, a manager must
consider the size of the group.
36
Impact of Group Size on Participation in Decision
Making
  • In general, as group size increases, the
    following changes in the decision-making process
    are likely to be observed
  • The leader becomes more psychologically distant
    from the other members.
  • The groups tolerance of direction from the
    leader is greater, and the teams decision making
    becomes more centralized.
  • The atmosphere is less friendly.
  • Rules and procedures become more formalized.

37
Advantages and Disadvantages of Group Decision
Making
  • Advantages
  • Disadvantages

Increased acceptance Greater pool of
knowledge Different perspectives Greater
comprehension Training ground
More time Social pressure Minority
domination Logrolling Goal displacement Groupthin
k
38
Groupthink
An agreement-at-any-cost mentality that results
in ineffective group decision making.
39
Groupthink
  • Characteristics of Groupthink
  • Illusions of invulnerability
  • Collective rationalization
  • Belief in the morality of group decisions
  • Self-censorship
  • Illusion of unanimity in decision making
  • Pressure on members who express arguments

40
Groupthink
  • Types of Defective Decisions
  • Incomplete survey of alternatives
  • Incomplete survey of goals
  • Failure to examine risks of preferred decisions
  • Poor information search
  • Failure to reappraise alternatives
  • Failure to develop contingency plans

41
Techniques for Quality in Group Decision Making
  • Brainstorming
  • A technique used to enhance creativity that
    encourages group members to generate as many
    novel ideas as possible on a given topic without
    evaluating them.
  • Freewheeling is encouraged.
  • Group members will not criticize ideas as they
    are being generated.
  • Piggyback on previously stated ideas.
  • No ideas are evaluated until after all
    alternatives are generated.
  • The wilder the ideas the better.
  • Quality is encouraged.

42
Techniques for Quality in Group Decision Making
  • Brainstorming
  • Nominal Group Technique
  • A structured process designed to stimulate
    creative group decision making where agreement is
    lacking or the members have incomplete knowledge
    concerning the nature of the problem.

43
Techniques for Quality in Group Decision Making
  • Brainstorming
  • Nominal Group Technique
  • Delphi Technique
  • Uses experts to make predictions and forecasts
    about future events without meeting face-to-face.

44
Techniques for Quality in Group Decision Making
  • Brainstorming
  • Nominal Group Technique
  • Delphi Technique
  • Devils Advocacy Approach
  • An individual or subgroup appointed to critique a
    proposed course of action and identify problems
    to consider before the decision is final.

45
Techniques for Quality in Group Decision Making
  • Brainstorming
  • Nominal Group Technique
  • Delphi Technique
  • Devils Advocacy Approach
  • Dialectical Inquiry
  • Approaches a decision from two opposite points
    and structures a debate between conflicting
    views.

46
Techniques for Quality in Group Decision Making
  • Brainstorming
  • Nominal Group Technique
  • Delphi Technique
  • Devils Advocacy Approach
  • Dialectical Inquiry
  • Story Boarding

A variation of Brainstorming using cards that can
be viewed and rearranged
47
Guidelines for Decision Making
  • Be committed to the decision-making process use
    it, and let data, not emotions, drive decisions.
  • Seek employees input before you make key
    decisions.
  • Believe in, foster, and support group decision
    making in the organization.

48
Guidelines for Decision Making
  • Believe that the best way to improve the quality
    of decisions is to ask and listen to employees
    who are doing the work.
  • Seek and use high-quality information.
  • Avoid top-down power-oriented decision making
    wherever possible.

49
Guidelines for Decision Making
  • Encourage decision-making creativity through risk
    taking, and be tolerant of honest mistakes.
  • Develop an open atmosphere that encourages
    organizational members to offer and accept
    feedback.

50
Skills managers need to develop for the decision
making process
  • Time management skills.
  • To make good decisions, managers need time to
    understand the problem and develop creative
    solutions.
  • Delegation skills.
  • Managers who know how to delegate are able to
    accomplish more than those who feel the need to
    be involved in every decision, no matter how
    trivial.

51
Effective Time Management Practices
  • Plan a list of things that need to be done today.
  • Plan weekly, monthly, and annual schedules of
    activities.
  • Schedule difficult and challenging activities
    when you are at your highest level of energy and
    alertness.
  • Set deadlines.

52
Effective Time Management Practices (continued)
  • Answer phone messages and e-mail in batches
    during a lull in your work schedule.
  • Have a place to work uninterrupted.
  • Do something productive during non-productive
    activities.

53
Effective delegation involves the following steps
  • Determine what you want done.
  • Match the desired task with the most appropriate
    employee.
  • Communicate clearly when assigning the task.
  • Ask questions to make sure the task is fully
    understood.
  • Set clear guidelines.

54
Effective delegation involves the following
steps (continued)
  • Keep communication channels open.
  • Allow employees to do the task the way they feel
    comfortable doing it.
  • Trust employees capabilities.
  • Check on the progress of the assignment.
  • Hold the employee responsible for the work.
  • Recognize what the employee has done, and show
    appropriate appreciation.

55
Applications of Management PerspectivesFor the
Manager
  • Procrastination is a major barrier to effective
    decision making.
  • Managers need to establish clear priorities by
  • Determining which activities produce the greatest
    value.
  • Setting dates for completion of these activities.
  • Setting priorities forces managers to make
    decisions and helps control procrastination.

56
Applications of Management PerspectivesFor
Managing Teams
  • Overly relying on team meetings is a barrier to
    making effective team decisions.
  • A team should be able to manage its workflow if
  • Subgroups or individual team members are assigned
    tasks and
  • They are given responsibility for decision making
    associated with these tasks.

57
Applications of Management PerspectivesFor
Individuals
  • When you feel fearful, angry, anxious, or
    frustrated
  • You are not likely to think clearly and focus on
    the problem.
  • It is not a good time to make a decision.
  • It is better to postpone the decision until after
    you have coped with the source of the stress and
    are in a more comfortable emotional state.

58
Chapter 7
Strategic Management
59
BUSINESS
  • the art of making irrevocable decisions based on
    insufficient knowledge

60
STRATEGY
  • Insight into
  • how to
  • create value

61
STRATEGY
  • Insight into
  • how to
  • create value

62
Management ChallengesAfter reading this chapter,
you should be able to
  • Understand how to implement the steps in the
    strategic management process.
  • Identify the factors that account for a firms
    sustained superior performance.
  • Link external and internal environment data to
    determine a firms strategic intent and mission.

63
Management Challenges (continued)
  • Conduct an analysis of the firms strengths,
    weaknesses, opportunities, and threats.
  • Evaluate the firms internal resources and
    capabilities.
  • Chose an appropriate business strategy at the
    corporate and business-unit level of analysis.

64
The Strategic Management Process
  • Strategic management involves the major
    decisions, business choices, and actions that
    chart the course of the entire enterprise.

65
The Strategic Management Process
  • Strategic management involves both long-range
    thinking and adaptation to changing conditions.
  • A strategy is successful if it provides the firm
    with sustainable competitive advantage.
  • Competitors will be unable to duplicate what the
    firm has done or will find it too difficult or
    expensive.

66
Strategic Planning
The purpose of strategic planning is to move the
organization from where it is to where it wants
to be.
Today
Vision for the Future
67
Components of the Strategic Management Process
Analyze internal and external environment
Define strategic intent and mission
Formulate strategies
Implement strategies
Assess strategic outcomes
68
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats

Scan External Environment
  • Implement
  • Strategy via
  • Changes in
  • Leadership
  • Culture
  • Human
  • Resources
  • Information
  • and Control
  • Systems
  • Formulate
  • Strategy
  • Corporate
  • Business
  • Functional
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Define New
  • Mission
  • Goals
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Scan Internal Environment
69
  • Scan External
  • Environment
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies

70
External Environmental Analysis
  • A continuous process which includes
  • Scanning Identifying early signals of
    environmental changes and trends
  • Monitoring Detecting meaning through ongoing
    observations of environmental changes and trends
  • Forecasting Developing projections of
    anticipated outcomes based on monitored changes
    and trends
  • Assessing Determining the timing and importance
    of environmental changes and trends for firms
    strategies and their management

71
The layer of the external environment that
affects the organization indirectly.
72
The layer of the external environment that
directly influences the organizations operations
and performance.
73
(No Transcript)
74
ENVIRONMENTAL SCANNING
  • Societal
  • Sociocultural
  • Political-Legal
  • Economic
  • Technological
  • Industry
  • Shareholders
  • Suppliers
  • Customers
  • Competitors
  • Others - gov., unions
    creditors

Internal Structure Culture Resources
75
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats
  • Scan External
  • Environment

SWOT Analysis
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Scan Internal Environment
76
Societal Task Environment
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats
  • Scan External
  • Environment

SWOT Analysis
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Internal Environment
Scan Internal Environment
77
SWOT ANALYSIS
STRENGTHS WEAKNESSES
are within the organization itself and not
usually within the short run control of
management
78
SWOT ANALYSIS
STRENGTHS WEAKNESSES
are within the organization itself and not
usually within the short run control of
management
79
SWOT ANALYSIS
STRENGTHS WEAKNESSES
are within the organization itself and not
usually within the short run control of
management
OPPROTUNITIES THREATS
are outside the organization, general factors
and trends in the societal environmental and
specific factors in the task/industry
environment
80
SWOT ANALYSIS
STRENGTHS WEAKNESSES
are within the organization itself and not
usually within the short run control of
management
OPPROTUNITIES THREATS
are outside the organization, general factors
and trends in the societal environmental and
specific factors in the task/industry
environment
Remember, Opportunities are presented by the
External Environment, not company actions
81
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats

Scan External Environment
  • Formulate
  • Strategy
  • Corporate
  • Business
  • Functional
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Define New
  • Mission
  • Goals
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Scan Internal Environment
82
External Environment
What the Firm Might Do
Matching Opportunities to Strengths
83
Strategy Formulation
  • Strategy Formulation
  • The process of developing long-range plans to
    deal effectively with environmental opportunities
    and threats in light of corporate strengths and
    weaknesses

Composed of Mission Objectives Strategies
Policies
84
Mission
  • Mission
  • The purpose or reason for the corporations
    existence. It may be narrow or broad in scope.

Narrow Broad Railroad Transportation Insurance Fi
nancial Services
85
Levels of Strategy
What business should we be in?
  • Corporate
  • Corporations overall direction and the
    management of its businesses

How will we compete?
Business Emphasizes improving the competitive
position of a corporations products or units
86
Formulating Corporate Strategy
What Business Should We Be IN?
87
Key Questions in Corporate Strategy
  • 1. What businesses should the corporation be in?
  • 2. How should the corporate office manage the
    array of business units?

Corporate Strategy is what makes the corporate
whole add up to more than the sum of its business
unit parts
88
GENERIC CORPORATE STRATEGIES
GROWTH STABILITY RETRENCHMENT
89
GENERIC CORPORATE STRATEGIES
Up down the value change Backward - Forward
GROWTH Vertical Integration Horizontal
Integration Concentric Diversification
Conglomerate Diversification
Geographic locations
Increasing
Range of products
Related industries
Unrelated
90
GENERIC CORPORATE STRATEGIES
STABILITY Pause/ Proceed with Caution No
Change RETRENCHMENT Turnaround Divestment Liquidat
ion
91
Formulating Business Strategy
How Will We Compete?
92
Business-Level Strategy
  • an integrated and coordinated set of commitments
    and actions the firm uses to gain a competitive
    advantage by exploiting core competencies in
    specific product markets

93
Porter's Competitive Strategies
Unique/different
  • Differentiation
  • Cost Leadership
  • Focus

Components of value chain
Competitive/market segment
94
TASK/INDUSTRY ANALYSIS
  • POTENTIAL ENTRANTS Economies of scale
    Product differentiation
    Capital requirements Switching costs
    Access to distribution
    channels Cost independent of size Government
    policy
  • RIVALRY Number of competitors Rate of industry
    growth Product characteristics Amount of fixed
    costs Capacity Height of exit
    barriers Diversity of rivals

SUBSTITUTES
BUYERS
STAKEHOLDERS
SUPPLIERS
95
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Primary Activities
96
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Inbound Logistics
Primary Activities
97
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Inbound Logistics
Operations
Primary Activities
98
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
99
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
100
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
101
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
102
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Technological Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
103
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Human Resource Management
Support Activities
Technological Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
104
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Firm Infrastructure
Human Resource Management
Support Activities
Technological Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
Operations
Primary Activities
105
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
MARGIN
Operations
Primary Activities
106
Outsourcing
Strategic Choice to Purchase Some Activities From
Outside Suppliers
Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
MARGIN
Operations
Primary Activities
107
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats

Scan External Environment
  • Implement
  • Strategy via
  • Changes in
  • Leadership
  • Culture
  • Human
  • Resources
  • Information
  • and Control
  • Systems
  • Formulate
  • Strategy
  • Corporate
  • Business
  • Functional
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Define New
  • Mission
  • Goals
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Scan Internal Environment
108
Benchmarking involves four stages
  • Identifying activities or functions that are weak
    and need improvement.
  • Identifying firms that are known to be at the
    leading edge of these activities or functions.
  • Studying the leading-edge firms by visiting them,
    talking to managers and employees, and reading
    trade publications.
  • Using the information gathered to redefine goals,
    modify processes, and acquire new resources to
    improve the firms functions.

109
Resource Types Tangible Resources
  • Assets that can be quantified and observed.
  • Include financial resources, physical assets, and
    workers.
  • Strategic assessment of tangible resources should
    enable a firm to use fewer tangible resources to
    support the same level of business or to use the
    same resources to expand the volume of business.

110
Resource Types Intangible Resources
  • Difficult to quantify.
  • Often provide the firm with strong competitive
    advantage.
  • Competitors find it difficult to purchase or
    imitate these resources.
  • Most strategically important intangibles
  • Reputation
  • Technology
  • Human Capital

111
Analyzing the firms capabilities
Functional Analysis
Value Chain Analysis
Benchmarking
112
Analyzing Capabilities by Functional Areas
113
Analyzing Capabilities by Functional Areas
(continued)
114
Strategic Outcomes
  • Firms need to periodically assess whether the
    outcomes meet expectations.
  • A firm must first and foremost cater to the
    desires of its primary stakeholders.
  • The firm should also consider the desires of
    other stakeholders affected by its performance.

115
Applications of Management PerspectivesFor the
Manager
  • An effective manager must be proactive in
    responding to evolving challenges and
    opportunities rather than being overtaken by
    events.
  • Learning to think strategically forces managers
    to
  • Be alert for changes in the external and internal
    environments.
  • Modify the firms strategic intent, mission, and
    formulated strategy when necessary.
  • Effectively implement the new or redesigned
    strategies.

116
Applications of Management PerspectivesFor
Managing Teams
  • The strategic management process generally
    involves teams of managers and employees from
    different areas who bring their perspectives and
    expertise to bear on issues facing the firm.
  • A key factor is how well the firm can mobilize
    and integrate the efforts of team members.

117
Applications of Management PerspectivesFor
Individuals
  • Individual employees are more likely to make
    greater contributions to the firm if they engage
    in activities that have strategic value.
  • Employees can be attuned to changes in their area
    of expertise and advise management on the
    strategic implications of those changes.
  • Employee success depends on the ability to adapt
    to the firms strategic change.

118
STRATEGY
  • Insight into
  • how to
  • create value

119
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats

Scan External Environment
  • Implement
  • Strategy via
  • Changes in
  • Leadership
  • Culture
  • Human
  • Resources
  • Information
  • and Control
  • Systems
  • Formulate
  • Strategy
  • Corporate
  • Business
  • Functional
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Define New
  • Mission
  • Goals
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Scan Internal Environment
120
(No Transcript)
121
(No Transcript)
122
Societal Task Environment
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats
  • Scan External
  • Environment

SWOT Analysis
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Internal Environment
Scan Internal Environment
123
GENERIC CORPORATE STRATEGIES
GROWTH STABILITY RETRENCHMENT
124
Porter's Competitive Strategies
  • Differentiation
  • Cost Leadership
  • Focus

125
  • Identify
  • Strategic
  • Factors
  • Opportunities
  • Threats

Scan External Environment
  • Implement
  • Strategy via
  • Changes in
  • Leadership
  • Culture
  • Human
  • Resources
  • Information
  • and Control
  • Systems
  • Formulate
  • Strategy
  • Corporate
  • Business
  • Functional
  • Evaluate
  • Current
  • Mission
  • Goals
  • Strategies
  • Define New
  • Mission
  • Goals
  • Identify
  • Strategic
  • Factors
  • Strengths
  • Weaknesses

Scan Internal Environment
126
Task
127
Thats it for today
128
Chapter 9
Managing the Structure and Design of Organizations
129
Management ChallengesAfter reading this chapter,
you should be able to
  • Outline the vertical and horizontal dimensions of
    organization structure.
  • Develop coordination across departments and
    hierarchical levels.
  • Differentiate between authority, responsibility,
    and accountability.
  • Recognize when structural characteristics of
    centralization, span of control, formalization,
    and chain of command should be used.

130
Management Challenges (continued)
  • Apply the three basic approaches functional,
    divisional, and matrix to departmentalization.
  • Use organization structure and the three basic
    organization designs mechanistic, organic, and
    boundaryless to achieve strategic goals.
  • Anticipate key strategic events likely to trigger
    a change in the structure and design of an
    organization.
  • Strengthen organizational culture to better
    achieve coordination across departments.

131
Organizing
  • The deployment of resources to achieve strategic
    goals. It is reflected in
  • The organizations division of labor that forms
    jobs and departments.
  • Formal lines of authority.
  • The mechanisms used for coordinating diverse jobs
    and roles in the organization.
  • Strategy indicates what needs to be done.
  • Organizing shows how to do it.

132
Organizing Defined
The process of determining the tasks to be done,
who will do them, and how those tasks will be
managed and coordinated.
The deployment of organizational resources to
achieve strategic goals.
Coordination
Integration
133
Organization chart
134
Organization Structure
  • Formal system of relationships that determine
  • Lines of authority who reports to whom.
  • Tasks assigned to individuals and units who
    does what tasks and with which department.
  • Dimensions of organization structure
  • Vertical dimension
  • Horizontal dimension

135
The Vertical Dimension of Organization Structure
  • The organization structure element that
    indicates
  • Who has the authority to make decisions.
  • Who is expected to supervise which subordinates.

136
Authority
  • Formal and legitimate right of a manager to make
    decisions, issue orders, and allocate resources
  • Vested in organizational positions, not people

137
Line Staff
  • Line employees directly involved in fulfillment
    of the primary mission of the organization

operations
sales
  • Staff employees provide specialized service to
    support line efforts

HR
138
Line and Staff Responsibilities
  • Line Personnel
  • Those organizational members that are directly
    involved in delivering the products and services
    of the organization.
  • Staff Personnel
  • Those organizational members that are not
    directly involved in delivering the products and
    services to the organization, but provide support
    for line personnel.

139
Chain of Command
  • An unbroken line of authority that links all
    persons in an organization and shows who reports
    to whom.

Unity of Command
A principle that each employee in the
Organization is accountable to one, and only one,
supervisor.
140
The Vertical Dimension of Organization Structure
(continued)
  • Authority The formal right of a manager to make
    decisions, give orders, and expect the orders to
    be carried out.
  • Line Authority
  • Staff Authority
  • Unity of Command a subordinate should have only
    one direct supervisor.
  • A decision can be traced back from the
    subordinates who carry it out to the manager who
    made it.

141
The Vertical Dimension of Organization Structure
  • Responsibility
  • the managers duty to perform an assigned task.
  • Accountability
  • the manager (or other employee) with authority
    and responsibility must be able to justify
    results to a manager at a higher level in the
    organizational hierarchy.

142
Delegation
  • Process to transfer authority and responsibility
    to positions below
  • Delegate authority to the lowest possible level.

But manager ultimately responsible
143
Delegation
The Delegation Triangle
Responsibility
  • Justify outcomes to those above in the chain of
    command.

Formal and legitimate right of a manager to make
decisions, issue orders, and allocate resources
Justify outcomes to those above in the chain of
command.
Authority
Accountability
144
Delegation Slide 1 of 7
  • Delegation
  • The process of transforming the responsibility
    for a specific activity or task to another member
    of the organization and empowering that
    individual to accomplish the task effectively.
  • Scalar principle
  • A clear line of authority must run throughout the
    organization.

145
Delegation Slide 2 of 7
  • The Process of Delegation
  • Assigning responsibility
  • Responsibility refers to the employees
    obligation to complete the activities that he or
    she has been assigned.
  • Granting authority
  • Authority is the formal right of an employee to
    marshal resources and make decisions necessary to
    fulfill work responsibilities.

146
Delegation Slide 3 of 7
  • The Process of Delegation
  • Establishing accountability
  • Where there is accountability for performance,
    employees understand that they must justify their
    decisions and actions with regard to the tasks
    for which they have assumed responsibility.

147
Delegation Slide 5 of 7
  • The Benefits of Delegation and Empowerment
  • Leads to a more involved and empowered workforce.
  • Leads to better decision making.
  • Provides opportunity for employee to develop
    analytical and problem solving skills.
  • Provides managers the opportunity to accomplish
    more complicated, difficult, or important tasks.

148
Delegation Slide 6 of 7
  • Reasons for Failing to Delegate
  • The time crunch.
  • Lack of confidence in the abilities of
    subordinates.
  • Managers try to avoid the potential pitfalls of
    dual accountability.
  • Managers may be insecure about their own value to
    the organization.

149
Delegation Learning to Delegate Effectively
Slide 7 of 7
  • Principle 1
  • Match the employee to the task.
  • Principle 2
  • Be organized and communicate clearly.
  • Principle 3
  • Transfer authority and accountability with the
    task.
  • Principle 4
  • Choose the level of delegation carefully.

150
Span of Management
  • Number of employees reporting to a supervisor
  • Tradition has recommended a span of management of
    four to seven subordinates.

151
Span of Control
Number of employees reporting to a supervisor
Tradition has recommended a span of management of
four to seven
152
Factors Determining Span of Control
  • Stability of subordinates' work
  • Subordinates perform similar tasks
  • Subordinates in a single location
  • Skill of subordinates
  • Procedures define tasks
  • Support available for the manager
  • Minimum time for nonsupervisory tasks
  • Managers' preferences and skills.

Chapter 9
Harcourt Brace Company.
153
The Vertical Dimension of Organization Structure
(continued)
  • Span of control the feature of vertical
    structure that outlines
  • The number of subordinates who report to a
    manager.
  • The number of managers.
  • The layers of management within an organization.

154
Tall Versus Flat Structure
  • Tall structure has an overall narrow span of
    management and more levels in the hierarchy
  • Flat structure has a wide span, is horizontally
    dispersed, and has fewer hierarchical levels
  • The trend is toward larger spans of management

155
The Vertical Dimension of Organization Structure
  • Centralization the location of decision
    authority at the top of the organization
    hierarchy.
  • Decentralization the location of decision
    authority at lower levels in the organization.
  • Formalization the degree of written
    documentation that is used to direct and control
    employees.

156
Centralization/Decentralization
Centralization
Decision authority located near the top
Decentralization
Decision authority located lower organizational
levels
157
Factors That Influence Centralization/Decentraliza
tion
  • Amount of change and uncertainty
  • Corporate culture
  • Size of organization
  • Cost and risk of failure
  • Efficiency of communication and control systems.

Chapter 9
Harcourt Brace Company.
158
The Horizontal Dimension of Organization
Structure
  • The organization structure element that is the
    basis for
  • Dividing work into specific jobs and tasks.
  • Assigning jobs into units such as departments or
    teams.
  • Departmentalization
  • Functional
  • Divisional
  • Matrix

159
Organization Design
  • The selection of an organization structure that
    best fits the strategic goals of the business.
  • Basic organization designs
  • Mechanistic
  • Organic
  • Boundaryless
  • These designs incorporate vertical and horizontal
    structural elements.

160
Mechanistic versus Organic Systems
  • Mechanistic Systems
  • Highly centralized organizations in which
    decision-making authority rests with top-level
    management.
  • Organic Systems
  • Decentralized organizations that push decision
    making to the lowest levels of the organization
    in an effort to respond more effectively to
    environmental change.

161
Mechanistic, Organic, and Boundaryless Designs
162
(No Transcript)
163
Mechanistic and Organic Organizations
Horizontal structure
Organic
1. Shared tasks
2. Relaxed
hierarchy, authority by expertise, few rules

3. Horizontal communications
4. Many teams,
task forces, 5. Informal,
decentralized decision making
Vertical structure
1. Specialized tasks
2.
Strict hierarchy of authority, many rules
3. Vertical communication and
reporting systems 4. Few teams, task
forces, or integrators 5.
Centralized decision making
Mechanistic
Chaotic Dynamic
Stable Unchanging
Degree of change uncertainty
164
Departmentation
  • The fundamental principle by which individuals
    are grouped into departments and departments into
    the organization

165
Approaches To Structural Design
166
Approaches To Structural Design
167
Approaches To Structural Design
168
Functional

Departments based on similar skills and resource
use.
Deep expertise
President CEO
Efficiency
Manufacturing
Accounting
Human Resources
-
Lack of innovation
Lack of communication
169
Advantages and Disadvantages of the Functional
Approach
  • Advantages
  • Decision authority is centralized at the top of
    the organization hierarchy
  • Career paths foster professional identity with
    the business function
  • High degree of efficiency
  • Economies of scale help develop specialized
    expertise in employees
  • Disadvantages
  • Communication barriers
  • Conflict between departments
  • Coordination of products and services is
    difficult
  • Diminished responsiveness to customers needs
  • Employees identify with functional department
    goals and not organization goals or needs of the
    customer

170
Divisional
Self contained
Encourages decentralization
Focus
President CEO
Speed
Product Program Geography
Division 1
Division 2
HR
Man
Acct
HR
Man
Acct
Generalists
Competition
Redundancy
171
Divisional Structure Slide 1 of 7
  • Divisional Structure
  • Members of the organization are grouped on the
    basis of common products, geographic markets, or
    customers served.
  • Types of Divisional Structures
  • Product divisional
  • Most appropriate for organizations with
    relatively diverse product lines that require
    specialized efforts to achieve high product
    quality.

172
Divisional Structure Slide 2 of 7
  • Types of Divisional Structures
  • Geographic divisional
  • Most appropriate for organizations with limited
    product lines that either have wide geographic
    coverage or desire to grow through geographic
    expansion.
  • Customer divisional
  • Most appropriate for organizations that have
    separate customer groups with very specific and
    distinct needs.

173
Divisional Structure Slide 3 of 7
Product Divisional
  • Advantages
  • Enhanced coordination.
  • Better assessment of manager performance and
    responsibility.
  • Development of generalist managers.
  • Disadvantages
  • Managers may lack expertise to operate in wide
    geographic areas.
  • Duplication of resources.

174
Divisional Structure Slide 4 of 7
Product Divisional Structure Clariant
(abbreviated)
CEO
Functional Chemicals
Master- batches
Fine Chemicals
Europe
Soaps
Electric Materials
Asia/ Pacific
Process Chemicals
Specialty Inter- mediaries
175
Divisional Structure Slide 5 of 7
Geographic Divisional
  • Advantages
  • Allows for focus on specific new markets.
  • Good structure for growth along geographic lines.
  • Adaptable to local needs.
  • Disadvantages
  • Duplication of product or product/technology
    efforts.
  • Coordination and integration are difficult.

176
Divisional Structure Slide 6 of 7
Geographic Divisional
  • Disadvantages
  • May be difficult to manage diverse product lines.

177
Divisional Structure Slide 7 of 7
Geographic Divisional Structure Canadian
National Railway Company
CEO
Eastern Canada Division
Gulf Division
Pacific Division
Prairie Division
Midwest Division
178
Divisional Organization Structure
President
Software Division
Consulting Source Division
Computer Division
Production
Production
Production
Marketing
Marketing
Marketing
Finance
Finance
Finance
179
Geographic-Based Organization Structure
180
Advantages and Disadvantages of the Divisional
Approach
  • Advantages
  • Coordination among different business functions
  • Improved and speedier service
  • Accountability for performance
  • Development of general manager and executive
    skills
  • Disadvantages
  • Duplication of resources by two or more
    departments
  • Reduced specialization in occupational skills
  • Competition among divisions

181
Matrix
One employee reports to 2 bosses at same time
Cross functional Teams
Innovative Creative
President CEO
Human Resources
Manufacturing
Accounting
Employee caught in Middle
Product 1
Product 2
Conflicting demands
Time
182
Advantages and Disadvantages of the Matrix
Approach
  • Advantages
  • Efficient utilization of scarce, expensive
    specialists
  • Flexibility that allows new projects to start
    quickly
  • Development of cross-functional skills by
    employees
  • Increased employee involvement in management
    decisions affecting project or product assignments
  • Disadvantages
  • Employee frustration and confusion as a result of
    the dual chain of command
  • Conflict between product and functional managers
    over deadlines and priorities
  • Too much time spent in meetings to coordinate
    decisions

183
Matrix Organization Structure
President
Vice President Finance
Vice President Operations
Vice President Manufacturing
Vice President Sales and Marketing
Region A Manager
Region B Manager
Region C Manager
184
Matrix Structure Slide 3 of 3
About PowerShow.com