Accounting-Finance

Learning Materials For Accounting, Management , Finance And Economics.

Thursday, May 9, 2013

Concept And Meaning Of Delegation Of Authority

Business , HRM

The process of assignment of specific work to individuals within the organization and giving them the right to perform those works is delegation. Delegation of authority is one of the most significant concepts in management practice, which affects managerial functions. Management is the art of getting things done through others and delegation means to get the results through the subordinates. The expansion of business volume and diversification of line of business makes it impracticable to handle all the business by a single manager. Therefore, the concept of delegation of some managerial authority to subordinates comes into practice in present day business organizations.Here, the manager delegates some of his authority to his subordinates. This helps in developing a feeling of dedication to the work among the subordinates. The top level management plays only the role of a supervisor and visits them to provide guidance, suggestions and instructions.It minimizes the work load of the top manager and also develops the overall working efficiency of the organization.


Therefore, delegation of authority is assigning work to others and giving them the required authority to perform the assigned task effectively. The concept of delegation has been developed due to the increase in the size of business and its complexity. A manager needs to delegate some of his authority to subordinates along with a specified responsibility. It is necessary to complete the work efficiently and effectively.
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Features Of Delegation Of Authority

Business , HRM
Delegation of authority possesses the following features:

1. No Delegation Of  Total Authority

A manager cannot delegate his/her total authority to the subordinates.He/she can delegate only a portion of it. A supervisor's status would be affected if he/she delegates total authority to the subordinates. It is not possible and is also not allowed by the management concept.

2. Delegation Of Only That Authority That A Manager Has

A manager cannot delegate the authority to a subordinate which he himself does not possess.It means that no one can give what he has not got. This feature is based on legality.

3. Representation Of The Superior

Delegation of authority to subordinates represents the superior in the subject matter which is delegated to him. In such a case, a subordinate is supposed to behave and act in the same manner in which the superior would have behaved and acted.

4. Delegation For Organizational Purpose

A superior delegates his authority to a subordinates only for organizational purposes.He cannot delegate the authority to fulfill his personal objectives.

5. Restoration Of Delegated Authority

Authority once delegated may be enhanced or reduced on the basis of nature of duties and its effectiveness. It may be completely withdrawn in case of ineffectiveness and termination of subordinates from the organization. Therefore, a manager does not permanently delegate his authority.

6. Balance Of Authority And Responsibility

A manager has to delegate authority to the subordinates on the basis of weight of responsibility to him. The assignment of responsibility to a subordinate without proper authority becomes worthless because that subordinate cannot perform the functions independently and efficiently.

7. No Delegation Of Responsibility

A manager can delegate authority to his subordinates in accordance with assigned responsibility, but the final responsibility, however,lies on him.He cannot escape from his responsibilities.
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Advantages Of Delegation Of Authority

Business , HRM
The following are the major advantages of delegation of authority:

1. Minimize Work Load Of Managers

Delegation of authority minimizes the workload of managers.They can assign regular and routine nature of work to their subordinates while they concentrate more effectively in managerial and creative functions. In this way, delegation of authority helps in improving managerial efficiency and effectiveness.

2. Benefit Of Specialization

Specialization is the means of success in a dynamic environment.The management delegates authority as well as responsibility to subordinates on the basis of their ability and knowledge. This contributes in the development of the concept of specialization among the subordinates.

3.Motivation And Morale

Delegation of authority develops among the subordinates a feeling of status and prestige. It helps to improve their working efficiency.It also promotes a sense of initiative and responsibility among them. This ultimately leads to maintenance of high morale on the part of subordinates. This motivation and morale of subordinates encourages them to develop their effort towards the achievement of common goals.

4. Training And Development

Delegation of authority provides a background for training and development of subordinates. The manager delegates some of his authority as well as responsibility to the subordinates in accordance with their ability. The subordinates have to perform a task on behalf of the superior and in the same situation they have to take decisions by using their own ideas and knowledge. This environment provides a framework for the development of managerial ability among the subordinates.

5. Facilitates Growth And Expansion

Delegation of authority facilitates growth and expansion of business activities. It provides flexibility in the organizational structure. According to the requirement, more layers can be added to the existing organizational structure through the process of delegation.

6. Quicker And Better Decision

Delegation of authority ensures a quicker and better decision. Subordinates get the authority to decide on the matters of their own area by remaining within the limitations. Here, subordinates can take quick decisions without consulting the superior. Decision making is also better because subordinates are closer to the reality of the situation.

                   Also read: Barriers To Delegation Of Authority

7. Basis Of Organizing

Delegation of authority is the basis of forming an organizational structure. The number of layers in the organizational structure depends upon the nature of delegation of authority and responsibility. In a similar way, the functioning of the enterprise is not possible without an organizational structure. Therefore, the management has to first decide on the layers of delegation of work, authority and responsibility and then proceed with the formation of organizational structure.
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Wednesday, May 8, 2013

Approaches To Decision Making

Business , HRM
The main approaches to decision making are as follows:

1. Classical Approach To Decision Making

Classical approach is also known as prescriptive, rational or normative model. It specifies how decision should be made to achieve the desired outcome. Under classical approach, decisions are made rationally and directed toward a single and stable goal. It is applied in certainty condition which the decision maker has full information relating to the problem and also knows all the alternative solutions. It is an ideal way in making decision. It is rational in the sense that it is scientific, systematic and step-by-step process. This model assumes the manager as a rational economic man who makes decisions to meet the economic interest of the organization. Classical approach is based on the following assumptions:

- The decision maker has clear and well-defined goal to be achieved.
- All the problems are precisely defined.
- All alternative courses of action and their potential consequences are known.
- The decision maker can rank the entire alternatives on the basis of their preferred consequences.
- The decision maker can select the alternative that maximizes outcome.

The classical model is supposed to be idealistic and rational but it is rarely found in practice. Therefore, this approach has many criticisms. It is known by normative theory rather than descriptive theory. Generally, managers operate under the condition of risk and uncertainty rather than the certainty condition. in many situations, complete goal stability can never be realized due to continuous environmental changes. It is applied only in the close system and not practicable in real life situations where environment is changing rapidly.

2. Behavioral Approach To Decision Making

Behavioral approach is also known as descriptive approach and administrative model. This theory is proposed by Herbert A Simon, a well known economist, in which he attempts to explain how decisions are made in real life situations. Managers have limited and simplified view of problems because they do not have full information about the problems, do not possess knowledge of all possible alternative solutions, do not have the ability to process environmental and technological information and do not have sufficient time and resources to conduct an exhaustive search for alternative solutions to the problems. Therefore, this model is based on two concepts: bounded rationality and satisfying.

Bounded Rationality: Simon believed that managers are bound by limited mental capacity and emotion as well as by environmental factors over which they have no control. Real life challenges, time and  resource limitations, political pressure and other internal and external factors force the manager to work under the condition of bounded rationality. Therefore, the manager cannot take perfectly rational decision.

Satisfying: It is the selection of a course of action whose consequences are good enough. Bounded rationality forces managers to accept decisions that are only good enough, rather than ideal. Such managerial decisions become rational but within the limits of managers' ability and availability of information. Managers make decisions based on alternatives that are satisfactory. The examples of satisfying decisions are fair price, reasonable profit, adequate market share, proper quality products etc.

3. Implicit Favorite Model/Retrospective Approach To Decision Making

This approach is applicable in non-programmed decisions. In this approach, the manager first choose an alternative solution to the problem and highlights its strength, and compare with other alternatives and then identifies its drawbacks. This is done with a view to proving that the alternative selected by him is the best solution to the given problem. However, another alternative which seems to be similar to the implicit favorite is short listed and is taken as second confirmation candidate. This approach can be observed in the purchase of various favorite items in which a customer gives arguments in favor of his choice on the basis of norms such as price, quality, appearance, easily availability, after-sales service etc. to reject other items of same utility.
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Decision Making Styles

Business , HRM
Decision making style basically depends on managers' approach to decision making. Decision making style propose that people differ in two dimensions when they approach decision making. The first is an individual's way of thinking and second is individual's tolerance for ambiguity. On the basis of the way of thinking and tolerance for ambiguity, decision making styles may be classified as directive, analytic, conceptual and behavioral.

1. Directive Decision Making Style

Managers who use directive decision making style have low tolerance for ambiguity and they rational in the way they think. They are very logical, efficient and take quick decisions within a short time. They assess few alternatives and also consider limited information while taking any decision. Basically such managers use their logic and idea while taking decisions.

2. Analytic Decision Making Style

Managers using analytic decision making style have much greater tolerance for ambiguity and rational way of thinking. They want more information before making a decision and also consider more alternatives. Such managers are more careful decision makers as they consider factual and detailed information before taking any decision. They have the ability to adapt or cope with unique situations.

3. Conceptual Decision Making Style

Managers using conceptual decision making style have high tolerance for ambiguity and have intuitive in their way of thinking. They  look at many alternatives. They focus on the long run and are very good at finding suitable solutions..

4. Behavioral Decision Making Style

Managers using behavioral decision making style have low tolerance for ambiguity and intuitive in their way of thinking. They are concerned about the achievement of subordinates and always take suggestions from others. They organize meetings of subordinates time and again to get information and suggestions. However, they try to avoid conflict. Acceptance by others is important to this decision making style. 
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Tuesday, May 7, 2013

Significacne Or Importance Of Decision Making

Business , HRM
Decision making is a process of selecting the best course of action from among many alternatives. It is useful for the successful operation of organizational activities.All the managerial functions such as planning, organizing, directing and controlling are determined by the decision. The following points describes the significance of decision making in the organization.

1. Pervasive Function

Decision making is essential in each level of management. Top level management makes strategic decisions such as planning, organizing, directing and controlling. Middle level management makes tactical decisions such as division of works, fixation of authority and responsibility, integration of efforts etc. Operating level management makes regular operating decisions such s preparation of schedule of daily works, divisions of works, delegation of authority etc. Thus, decision making function is performed in all the levels of management according to needs. This is necessary to bring uniformity and smoothness in the organizational performance.

2. Indispensable Component

Decision making is known as an inseparable part of management functions. It is one of the essential processes for successful operation of business. It determines all management functions and covers every part of the organizational structure. Every manager from top level to the first line is involved in the decision making process according to the nature of works.

3. Evaluation Of Managerial Function

Decision making is a time consuming process and decision makers spend more time to select the alternative. The quality of decision serves as the yardstick for evaluating managerial performance. It provides a clear line of guidance to the management for the achievement of defined objectives. The achievement of managerial performance is evaluated  and measured with planned performance.

4. Selection Of Best Alternatives

Decision making is the process of selecting a best course of action from among many alternatives. A problem might be solved in different ways on the basis of time and situation. The decision maker evaluates all the possible alternatives on the basis of organizational process and suitability. The selection of the best course of action is significant to bring smoothness in operation and achieve organizational goals.

5. Establishment Of Plans And Policies

The establishment of plans and policies is the initial part of decision making. Every organization is established for a definite objective and for this, formation of plans and policies is necessary. Thus, at the initial stage, the management decides the clear line of action and the procedures to gain defined objectives. The practical implementation of defined line of actions and procedures is an efficient way in bringing smoothness and uniformity in organizational performance. Finally, it is helpful in achieving organizational goals.

6. Successful Operation Of Business

Decision making is one of the important tools for the successful operation of the business. In course of operation, many problems may arise at different situations and times. The management solves those problems in time by using decision making tools.
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Features Of Decision Making

HRM , Management
Main features/nature of decision making are as follows:

1. Decision Making Is A Selective Process

Decision making is the process of selecting a course of action from among many alternatives to solve problems. Managers have to consider the various factors before selecting a course of action. These factors involve nature of organization, existing working environment, objectives of the organization, time factors and so on.

2. Decision Making Is Human And Rational Process

Decision making is mental or human process and is needed in all types of organizations. A manager has to make mental exercise to study the impact of course of action before taking a decision. He/she has to invest personal skills, experience, knowledge and capability to study the course of action from various angles. Hence, decision making is common in all types of organizations. Therefore, it is known as human and rational process.

3. Decision Making Is A Dynamic Process

It is essential to consider time factor and existing environment, whenever any course of action is taken for implementation. Managers have to take decisions at the right time for its effectiveness. Besides, they have to consider future environments, which may affect future activities. Thus, decision making process is not static but dynamic process.

4. Decision Making Is Goal Oriented Process

Decision making focuses on the organizational objectives. In course of functioning many problems may arise in the organization. The management has to solve all the problems in proper time and also in a systematic manner by considering organizational goals. Thus, right decision at the right time contributes to achieve predetermined objectives within the defined time and standard.

5. Decision Making Is A Continuous Process

Decision making is a continuous process till the existence of the organization. In the course of regular performance, many problems may arise in different time and situation. Managers have to solve those problems in proper time so that the organizational performance is smooth.

6. Freedom To Decision-Maker

Managers have freedom to take any kind of decision. As a chief of organization, a manager may take any course of action to solve a problem by using his/her own logic, knowledge and experience.

7. Positive Or Negative Impact

A course of action may either have positive or negative impact on organizational performance. Managers have to consider, as far as possible, the positive impact of the action before coming to a decision.
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