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Management is Decision Making

This page emphasizes the need for managers to devise decision making and strategic planning processes.

Review: Management and Decision Making; Kay, et al, Chapter 2 (pp. 17-28)

• Functions of management
  • Planning, deciding, implementing, and controlling
• Restated, the functions of management can be described as planning what to do (e.g., assessing alternatives), deciding what to do, implementing what was decided, and responding to the outcome of the previous plan, decision, and implementation.
• Management is an ongoing process; even though the functions may be described as discrete steps, business managers are inevitably performing each of the functions on an ongoing basis. Likewise, an outcome of the "control" step is to review, refine and update the previous plan, decision and implementation. Thus management is an ongoing process.

Another description of Management

Management is "[a]ttaining the organization's goals through an effective and efficient manner through planning, organizing, leading and controlling" (This statement contains seven concepts, can you define or explain each of the seven concepts?)

• goals -- the decision criterion?
• effective -- the goal is accomplished
• efficient -- the goal is accomplished with as few resources as possible
• planning -- developing a vision for what the manager wants to accomplish and how it will be accomplished
• organizing -- identifying, acquiring, and using the resources needed to accomplish the vision
• leading -- motivating others to work towards the same goals
• controlling -- measuring the results, assessing whether the appropriate progress is being made, and making appropriate changes

Types of decisions

The type of decision that needs to be made can impact how the manager makes the decision.

• Importance -- Some decisions are more important than others. Important decisions may warrant taking additional time to gather information and analyze alternatives. Important decisions are less likely to be delegated to a subordinate.
  • How would you define an "important" decision? What distinguishes an important decision from a less important decision?
• Frequency -- Some decisions are made frequently or repeatedly. In this situation, a pattern of how to analyze the situation each time, what factors need to be considered, and what decision should be made based on the observed factors may become routine. With proper explanation, such decisions probably can be delegated. An infrequent decision, on the other hand, may take more time and consideration because the manager has less experience thinking about "what are the most important factors in making this infrequent decision, and how do I locate and analyze the appropriate information."
• Imminence (decision is needed NOW) -- Some decisions require an immediate response; there is no time for extensive study and discussion. In this situation, whoever has the information probably needs to make the decision. A decision that does not need to be made immediately offers the opportunity to gather and analyze more information. It also offers an opportunity to consider who is in the best position to make the decision.
• Revocability -- A decision that can be easily reversed probably will be made with less gathering and analysis of information, and probably can be made by the person who is directly involved. A decision that is difficult to reverse should likely be analyzed more fully before it is made.
• Number of alternatives -- A decision with numerous alternatives will likely take more time and analysis than a decision where there are few alternatives. There may be an occasional situation that requires a decision but there appears to be no alternative, thus there really is no decision in such a situation other than perhaps "do we proceed now or later."

Levels of Management

In more complex or larger firms, there may be several levels of managers, such as top managers, middle managers, front-line managers, and project managers. But rather than think about the levels of managers, it may be helpful to consider levels of management.

What type of questions are addressed at each level of management?  What is the role of each level of management? Can a person function in more than one level of management, especially in a relatively small business?

• Top level management -- set the overall business goals, define strategies to achieve the overall goals, monitor and interpret the external environment, have a long-term vision, communicate that vision to others, shape the business' culture, nurture entrepreneurship, help the company respond to change and opportunities.
• Middle management -- implement the strategies and policies defined by top level decisions, facilitate change and respond to shifts in the environment
• Front-line management -- responsible for production processes, achieve efficient production, provide technical assistance, motivate employees, focused on day-to-day goals
• Project management -- responsible for a temporary work project

In a small business, individuals may need to manage at several levels.  For example as a sole proprietor, a farmer with several employees may need to perform each level of management, ranging from long-term planning to directing the repair of a piece of equipment.

Characteristics of business management strategies:  information-based, flexible, empower colleagues/employees, use information technology, thinks about the global economy, builds on the strength of diversity, and embraces ongoing change.

• Why are these characteristics important?

Managers need to provide leadership, team-building, connectivity or a network, collaborative relationships, a "learning organization" (professional development), and capacity to handle unexpected events.

• During unexpected or adverse events, stay calm, be visible/available/approachable, put people first (short-term strategy to achieve long-term goals), be truthful/honest/open/direct, and know when to shift out of "emergency management".
• Do not overlook the role of goals and information in making decisions (for example, steps 1 through 4 of the strategic planning process).

Managers are a source of information (informational), assure communication and teamwork (interpersonal), and identify alternatives and make a choice (decisional).

There is More Than One Management Style

Developing your management style is one focus of this course. Your management process will not be identical to my management process, so each of us needs to develop our own process. We are different people and we are involved in different businesses, thus our management style or process will not be identical. However, there are some commonalities that many managers follow or practice. These are the points we will focus on; they will hopefully help each of us develop our own management process.

• What about decisions concerning production, finance, marketing, labor, risk, etc?  How are these decisions made?  What factors does the manager need to consider in making these decisions?  What analytical tools does economic theory describe, e.g., marginal cost and marginal revenue?  What other analytical tools could managers use?  What do producers need to know (what information does a manager need) to apply or use these analytical tools?

How does a manager make a decision?  The next topic addresses the role of goals in decision making.

Last Updated August 23, 2010

Email: David.Saxowsky@ndsu.edu

This material is intended for educational purposes only. It is not a substitute for competent professional advice. Seek appropriate advice for answers to your specific questions.

E-Mail:sswandal@ndsuext.nodak.edu
Published by Agricusiness and Applied Economics
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