Summary Sheet – Helpful for Retention

For

General Management – Part 2

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 Important Points

1. This Summary Sheet shall only be used for Quick Revision after you have
read the Complete Notes
2. For Building Concepts along with examples/concept checks you should
rely only on Complete Notes
3. It would be useful to go through this Summary sheet just before the
exam or before any Mock Test
4. Questions in the exam are concept based and reading only summary
sheets shall not be sufficient to answer all the questions

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 1 Summary Points

➢ Management Processes: Given By Koontz & O’Donnel, Planning, Organizing, Staffing,

Directing and Controlling

1. Planning: Concerns with formulating future course of action and choosing appropriate
course of action to achieve goals
2. Organizing: Concerns with bringing together physical, financial and human resources
to form a productive relationship to achieve goals
3. Staffing: Concerns mainly with staff related issues i.e. handling of human resources
4. Directing: Puts all the resources into action which requires supervision, motivation,
leadership and communication factors to be exercised for achievement of goals
5. Controlling: Concerns with measurement & correction of performance activities of
subordinates in order to make sure that the goals are achieved

Note: In this summary sheet, only Planning and Organizing functions have been covered

➢ Planning
➢ Tests to Check the Planning capacity of a person
1. Tower of Hanoi (TOH-R): Puzzle invented in 1883 by French mathematician Edouard
Lucas
✓ Consists of 3 rods and 7-9 discs of subsequent sizes
✓ Objective of the puzzle is to move the entire stack of one rod to another one
which requires Planning skills
✓ Rules of the puzzle:

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 ✓ Only one disk moved at a time and no disk is places upon the
smaller disk
✓ Each move requires taking upper disk from one of the rods and
sliding it into another rod on top of other disks
2. Tower of London(TOL): Developed in 1992 by Shallice to detect defects in the
planning capabilities of a person

➢ Characteristics of Planning:
1. Planning is Primary Function: Management process starts with planning.
2. Planning is Result Oriented: Done to achieve goals
3. Planning is Looking Ahead in future: Done for analyzing future planning and
forecasting
4. Planning is a continuous activity: Continuous function of management with feedback
process and improvements
5. Planning is Pervasive: Required for all the business activities and by all the managers
at all the levels
6. Planning is Interdependent activity: One departmental plan is dependent on other
departmental plans
7. Intellectual Process: Requires imagination, intelligence, talent, vision etc. on part of
managers with practical considerations
8. Planning Involves Decision making: One has to evaluate various alternatives while
planning
9. Planning is flexible: Must be able to cope with changes in external and business
related factors

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 ➢ Steps in Planning:

1. Setting Objectives: Objectives provide nucleus to the planning process. Objectives

should be SMART (Specific, Measurable, Achievable, Realistic and Time bound)
2. Developing Premise: Planning premises are the assumptions which provide a
framework within which plans operate which could be related to internal and
external environment
3. Identifying Alternatives: Planner should always frame alternative plans instead of
only one final plan
4. Evaluating Alternatives: Evaluation of alternatives should be in terms of cost and
returns possible from that particular plan
5. Selecting Best Alternative: After evaluation, planner should select the best plan
out of all the alternatives, i.e. one with minimum cost and maximum returns
6. Implementation: With all the derivative plans in hand, final plan should be
implemented with consultation with the people involved in executing it
7. Follow Up: After the selected plan is implemented, it is important to appraise its
effectiveness

➢ Types of Plans

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 ➢ Strategic or Tactical Plans

Differences related to Strategic and Tactical plans are:

✓ Strategic Plans are related to company mission related issues which are
handled by upper management. Tactical Plans are related to actions taken
day-to day to execute strategic objectives, hence they are implemented by
lower management
✓ Facts on which to base strategic plans are usually more difficult to gather
than are facts on which to base tactical plans
✓ Strategic plans are generally less detailed than tactical plans
✓ Strategic planning focuses on the long term and tactical planning on the
short term
➢ Long term or Short Term: Plans needed to execute within 1 year are short term and which
requires more than 1 year are long term
➢ Directional or Specific Plans: Specific Plans have clearly defined objectives with no room for
misunderstanding whereas Directional plans generally refer to general guidelines that have
inherent flexibility
➢ Single use or Standing Plans: Single use plans are developed only for specific objective and
become obsolete after its achievement whereas Standing plans are developed to be used
again and again. Below is the diagram that depicts components of executing each plan from
the initial stage,

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 ➢ Limitations of Planning:
1. It is time consuming
2. Involves lots of paper work
3. Costly activity as it involves analysing and collection of data
4. Generates frustration in managers if planned objectives are not met in spite of
best effort
5. Planning is difficult in dynamic business environment
6. Generates rigidity in performance as managers are required to stick with planned
objectives

➢ Top Down and Bottom Up Approach in Planning

1. Top Down Approach( Stepwise Design or Decomposition method): Denotes the
breaking down of a system to gain insight into its compositional sub-systems in a
reverse engineering fashion. It is often specified with the assistance of "black
boxes", which makes it easier to manipulate.
2. Bottom Up Approach: Denotes the piecing together of systems to give rise to
more complex systems, thus making the original systems sub-systems of the
emergent system. Its strategy often resembles a "seed" model, by which the
beginnings are small but eventually grow in complexity and completeness.

➢ Structured and Unstrucutred Plans

1. Structured and formal plans are used in projects, diplomacy, careers, economic
development, military campaigns, combat, sports, games, or in the conduct of
other business
2. Informal or ad hoc or Unstructured plans are created by individuals in all of their
pursuits

➢ Decision Making in Planning: It is the process of identifying and choosing alternatives

based on the values, preferences and beliefs of the decision-maker. It is a combination
of Psychological, Cognitive and Normative process.

➢ MCDA and Decision Making Paradox

1. Multiple-criteria decision making or multiple-criteria decision analysis is a

subdiscipline of operation research that explicitly evaluates multiple
conflicting criteria in decision making like choosing between cost or quality of
product.
2. Decision Making Paradox arises from the observation that different decision-
making methods yield different results, when fed with exactly the same decision
problem and data

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 ➢ Logical and Intuitive Decision Making
1. Logical decision-making is an important part of all science-based professions,
where specialists apply their knowledge in a given area to make informed
decisions
2. In situations with higher time pressure, higher stakes, or increased ambiguities,
experts may use intuitive decision-making rather than structured approaches
3. Recognition-primed decision (RPD) is an intuitive decision making technique.
4. In RPD, the decision maker is assumed to generate a possible course of action,
compare it to the constraints imposed by the situation, and select the first course
of action that is not rejected

➢ Steps in decision making process

1. Process 1:
✓ Establishment of objectives
✓ Classification of objectives and placement in order of importance
✓ Development of alternative actions
✓ Evaluation of alternatives against all objectives
✓ The alternative that is able to achieve all the objectives is the tentative
decision
✓ The tentative decision is evaluated for more possible consequences
✓ The decisive actions are taken, and additional actions are taken to prevent
any adverse consequences
✓ There are steps that are generally followed that result in a decision model
that can be used to determine an optimal production plan
✓ In a situation featuring conflict, role-playing may be helpful for predicting
decisions to be made by involved parties
2. Process 2:

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 ➢ Stages in Group Decision Making (Given by B. Aubrey Fisher)
1. Orientation: Members meet for the first time and discuss
2. Conflict: Disputes, fights occur between members which they eventually work out
3. Emergence: Group members tries to rule out vague options by talking out
4. Reinforcement: Members make final decsion and provide its justification

➢ Type of Decisions or Decision Making Techniques

1. Group Techniques
✓ Consensus decision-making: Requires that a majority approve a given
course of action, but that the minority agrees to go along with the course
of action
✓ Voting based methods: Various voting based methods like majority,
pluraity and range voting technqiues are helpful
✓ Delhpi Technique: A multipurpose planning tool and a group process that
anonymously generates ideas or judgments from physically dispersed
experts
✓ Dotmocracy: Special forms are distributed to allow large groups to
collectively brainstorm and recognize agreement on an unlimited number
of ideas they have authored. Another way is through sticker Dot-Voting
✓ Participative decision-making: Authority allows decision making with
collaborative effort
✓ Decision Engineering: Uses visual map for decision making using various
decision making tools like machine learning, big data
✓ Gathering: Involves all participants acknowledging each other's needs and
opinions and tends towards a problem solving approach in which
everybody’s view is considered
✓ Sub-committee: Involves assigning responsibility for evaluation of a
decision to a sub-set of a larger group, which then comes back to the larger
group with recommendations for action
✓ Social decision schemes: These are the methods used by a group to
combine individual responses to come up with a single group decision.
Delegation, Averaging, Plurality, Unanimity and Random are few schemes.
✓ Normative Decision Making Model: Recommended by Victor Vroom that
suggests different decision-making methods should be selected depending
on the situation

2. Individual Techniques
✓ Decision balance Sheet: Representing the pros and cons of different
choices and for helping someone decide out of it

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 ✓ Simple prioritization: Choosing the alternative with the highest
probability-weighted utility
✓ Satisficing: Examining alternatives only until the first acceptable one is
found
✓ Acquiesce to a person in authority
✓ Anti-authoritarianism: Taking the most opposite action of the authority
✓ Flipism e.g. flipping a coin, cutting a deck of playing cards, and other
random or coincidence methods
✓ Automated decision support
✓ Decision support systems

3. Other techniques
✓ Brain Storming
✓ Decision Trees: One identifies options, branching out of an initial bipolar
choice to make, by projecting likely outcomes
✓ Nominal Group Technique (NGT): NGT is a decision making method for
use among groups of many sizes, who want to make their decision quickly,
as by a vote, but want everyone's opinions taken into account

✓ PERT (Programme Evaluation Review Technique): method to analyze the

involved tasks in completing a given project, especially the time needed to
complete each task, and identifying the minimum time needed to
complete the total project

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 ➢ Biases in decision making
1. Selective search for evidence (also known as confirmation bias)
2. Premature termination of search for evidence
3. Cognitive inertia
4. Selective perception
5. Wishful thinking
6. Choice-supportive bias or post-purchase rationalization
7. Recency
8. Primacy Effect
9. Repetition bias
10. Anchoring and adjustment is a cognitive bias that describes the common human
tendency to rely too heavily on the first piece of information offered
11. Groupthink is peer pressure to conform to the opinions held by the group
12. Source credibility
13. Attribution asymmetry
14. Underestimating uncertainty and the illusion of control
15. Sunk-cost fallacy involves an individual making a decision about a current
situation based on what they have previously invested in the situation
16. Prospect theory involves the idea that when faced with a decision-making event,
an individual is more likely to take on a risk when evaluating potential losses, and
are more likely to avoid risks when evaluating potential gains
17. Optimism bias is a tendency to overestimate the likelihood of positive events
occurring in the future and underestimate the likelihood of negative life events
18. Reference class forecasting or comparison class forecasting is a method of
predicting the future by looking at similar past situations and their outcomes

➢ Drawbacks of Group decision making:

1. Procrastination of high priority tasks

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 2. Groups might quickly take a decision whithout giving sufficient time to discusss
and then boloster their decision at the same time downplaying other choices
3. Denies responsibility
4. Group muddles through the issue by considering only a very narrow range of
alternatives
5. Members accept a low-risk, easy solution instead of searching for the best
solution
6. Trivialization: Group focuses on trivial issues than major ones

➢ Limitations in Group Decision Making according to Forsyth:

Three categories of potential biases that a group can fall victim to when engaging in
decision-making

✓ Sins of Commission: Belief perseverance (utlizing info already deemed

incorrect), Sunk cost bias(committing to a plan since investment is
made),extra-evidentiary bias(follows plan even if recommended to ignore)
and Hindsight bias (falsly overestimate the accuracy of their past
experience)
✓ Sins of Omission: Base rate bias(overlooking information regarding basic
trends/facts) and fundamental attribution error(base their decisions on
inaccurate appriasals of individual behavior)
✓ Sins of imprecision: Availability heuristic, Conjuntive bias(group being less
known about the probability of two events occurring together) and
representativeness heuristics (rely on factors that are meaningful but are
misleading)

➢ Organizing:
➢ Principles of Organization:
1. Orientation towards Goals and Objectives: Every organization and the respective
departments in it should have well defined objectives
2. Specialization: Work should be divided among the departments and the individuals
to make them specialized in it
3. Co-ordination: Activities between individuals and departments should be well co-
ordinated
4. Delegation of authority: Authority is clearly defined with underlying responsibility
5. Balance: Balance of authority & responsibility,centralization & decentralization,
human &material resources, etc
6. Span of control: Denotes number of subordinates that can be effectively managed by
the supervisor
7. Unity of command: Subordinates should get order from only one person at a time

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 8. Scalar Chain: Denotes chain of authority from top to bottom
9. Continuity: Organizing activities is a continuous process and never comes to end
10. Flexibility: Organizing process should be flexible enough to be adaptable to any
change

➢ Benefits of Organization:
1. Delineates well defined job structure in the organization
2. Inculcates specialization of skills in the workforce
3. Clarifies authority in the organization at every position
4. Acts as a means to co-ordinate activities and processes
5. Helps to use resources in optimal way
6. Facilitates growth and diversification in the organization
7. Leads to humane treatment of the employees in the organization

➢ Formal Organization:
1. Refers to structure of well-defined jobs, having definite authority and responsibility
2. Established to achieve well defined objectives
3. Rules and regulations are followed by all the people
➢ Informal Organization:
1. Exists within the formal organization
2. Network of personal and social relations existing in a formal organization
3. No well-defined objectives to be achieved in this kind of association
4. Helps in social satisfaction, increases co-operation, provides communication channel
to get work done, lighten management workload, inculcates social values, acts as a
filler of management capabilities, etc
5. Drawbacks could be that it is resistant to change, leads to rumor, role of conflict, etc

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 ➢ Process of Organizing

1. First step in organizing is to identify and enumerate the activities

2. Second step leads to classification of activities into appropriate departments. This
is also called Principle division of work
3. Third step is related to assigning individual activities to different individuals
4. Fourth step relates to delegating authority commensurable to responsibility to
suitable person with sufficient skills
5. Fifth step relates to co-ordination of all activities in the organization

➢ Organizing Charts: It’s a diagram that shows the structure of an organization as well as
the relationships and relative ranks of its positions. There are three different types of
organization charts:
✓ 1. Hierarchical
✓ 2. Matrix
✓ 3. Flat or Horizontal
➢ Organization Manual: A repository for organization data commonly used by company
managers. It enables him to visualize the company organization as a whole and to see his
own responsibilities as part of the total picture.

➢ Organization Structures: It’s a framework through which management works to

accomplish its objectives. Provides foundation on which standard operating procedures
and routines rest and clarifies decision making process

➢ Various Structures:

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 1. Pre-bureaucratic structures: Lacks standardization of tasks and works best in
smaller organizations with centralized authority
2. Bureaucratic structures: Degree of standardization is present. Consists of various
levels of managements. Decisions are made through organized process and
information flows from to bottom. It has got tight and rigid procedures
3. Post Bureaucratic: Generally practiced in non-profit organizations where
decisions are made thorugh consensus to encourage participation
4. Line Organization: In this, line of authority is defined from top to bottom in a
vertical way in the organization and responsibility from bottom to top

5. Functional Organization: Introduced by F.W. Taylor to bring about specialization

of management. It is a mid-way position between line and staff authority Manager
from one department can give advice/order to person from other department but
only related to his/her functional area.

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 6. Line and Staff Organization: Tries to combine the activities of line and staff
executives. Line managers have total authority over those who report directly to
them, but staff workers have primarily advisory authority. Staff positions have 4
types of authority:

✓ Advise authority: Where staff managers give advices to the line managers
to take action and line managers chooses to take it or not

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 ✓ Compulsory advice/ Compulsory consultation: Line managers must
consider the staff person's advice, but can choose not to heed it
✓ Concurrent authority: Line manager cannot finalize a decision without the
agreement of the staff person
✓ Functional authority: Staff person has complete formal authority over his
or her area of specialty

7. Divisional Structure: The divisional structure or product structure consists of self-

contained divisions. A division is a collection of functions which produce a product.

8. Committee Organization: Defined as a group of people performing some aspect

of managerial function and used as supplementary to existing organization
structure.

9. Project Organization: It is a temporary thing which exists from the projects start
until its end and consists of members from different parts of the organization.

10. Matrix Organization: Represents a combination of two or more structures. It can

be combination of project organization and functional organization. The authority
of departmental managers flows downwards whereas authority of project
manager’s flows across. Types of matrix:
✓ Weak/Functional Matrix: A project manager with only limited authority is
assigned to oversee the cross- functional aspects of the project.
✓ Balanced/Functional Matrix: A project manager is assigned to oversee the
project. Power is shared equally between the project manager and
the functional managers.
✓ Strong/Project Matrix: A project manager is primarily responsible for the
project.

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 11. Team: Relates to the concept of team building in the organization which can be
horizontal or vertical way

12. Network: Managers in network structures spend most of their time coordinating
and controlling external relations, usually by electronic mean

13. Virtual: Closely coupled upstream with its suppliers and downstream with its
customers such that where one begins and the other ends means little to those
who manage the business processes within the entire organization

14. Hierarchy Community Model: Utilizes the organizational chart to study the
hierarchical structure which brings across individuals’ roles and formal authority
within their designated space at the workplace, and social network analysis to map
out the community structure within the organization

➢ Delegation of Authority: Elements of Authority:

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 1. Authority: Defined as the power and right of a person to use and allocate the
resources efficiently, to take decisions and to give orders so as to achieve the
organizational objectives. This flows from top to bottom.
2. Responsibility: Relates to duty of the person to complete the task assigned to him.
It flows from bottom to top
3. Accountability: Giving explanations for any variance in the actual performance
from the expectations set. It is not delegated

➢ Difference between Authority and Responsibility

➢ Process of Delegation: Authority is delegated, responsibility is created and

accountability is imposed

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 ➢ Principles of Delegation:
1. Principle of result expected
2. Principle of Parity of Authority and Responsibility
3. Principle of absolute responsibility
4. Principle of Authority level given

➢ Centralization: All important decisions of the organization like planning and decision
making are concentrated in few hands and generally in the upper management of the
organization

➢ Decentralization: Involves systematic delegation of the authority at all levels of the

management in all of the organization. In this major compnay decisions are taken by the
upper management while work specific kind of authority is distributed among subsequent
levels
➢ Factors affecting Centralization/Decentralization:
1. The external environment in which the firm operates. Unpredictable environment
leads top level management to delegate responsibilities to the lower level
2. Nature of decision itself,i.e. riskier decisions involves more centralized decisions
to take place
3. Abilities of lower level managers. Strong Decision making skills of lower level
managers leads to decentralization
➢ Difference between Delegation and Decentralization

Area Delegation Decentralization

Meaning Managers delegate some of their function and
Right to take decisions is shared by top
authority to their subordinates. management and other level of management
Scope Scope of delegation is limited as superior Scope is wide as the decision making is shared
delegates the powers to the by the subordinates also
subordinates on individual bases.

Responsibility Responsibility remains of the managers and Responsibility is also delegated to subordinates.

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 cannot be delegated
Freedom of Freedom is not given to the subordinates Freedom to work can be maintained by
Work as they have to work as per the instructionssubordinates
of as they are free to take decision
their superiors and to implement it.
Need on purpose Delegation is important in all concerns Decentralization becomes more important in
whether big or small. No enterprises can work
Large concerns and it depends upon the decision
without delegation. made by the enterprise, it is not compulsory.

Grant of Authority The authority is granted by one individual to It is a systematic act which takes place at all
another. levels and at all functions in a concern.
Grant of Responsibility Responsibility cannot be delegated Authority with responsibility is delegated to
subordinates.

Degree Degree of delegation varies from concern to Decentralization is total by nature.

concern and department to department.
Process Delegation is a process which explains
superior subordinates relationship
It spreads throughout the organization i.e. at
all levels and all functions
It is an outcome which explains relationship
between top management and all other
departments.

Withdrawal Delegated authority can be taken back. It is considered as a general policy of top
management and is applicable to all departments.

➢ Span of Control: Also called as span of management or span of supervision i.e. number of
subordinates reporting to the senior. This concept was introduced by Sir Ian Hamilton. A small, or
narrow, span of control results in each manager supervising a small number of employees, while a
wide span of management occurs when more subordinates report directly to a given manager

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 ➢ Graicunas theory on span of management: Explained three kinds of relationships that a superior
can have with subordinates. He formulated a theory and suggested the number of subordinates under
one superior based on mathematical calculation

➢ Departmentalization: Process of grouping activities into departments which leads to

division of labor that creates specialists in the organization.
➢ Functional Departmentalization: Grouping activities by functions performed into various
departments like IT, accounting, manufacturing, logistics, etc
➢ Product Departmentalization: Grouping activities by product line. Tasks can also be grouped
according to a specific product or service, thus placing all activities related to the product or
the service under one manager.
➢ Customer departmentalization: Grouping activities on the basis of common customers or
types of customers.
➢ Geographic departmentalization: Grouping activities on the basis of territory. If an
organization's customers are geographically dispersed, it can group jobs based on geography.
➢ Process departmentalization: Grouping activities on the basis of product or service or
customer flow
➢ Divisional departmentalization: When the firm develops independent lines of business that
operate as separate companies, all contributing to the corporation profitability

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