Showing posts with label Management. Show all posts
Showing posts with label Management. Show all posts

Disadvantages Of Decentralization

Decentralization has the following drawbacks or disadvantages:

1. Decentralization Increases Expenditure
Decentralization needs qualified, competent and skilled managers at the middle and lower levels. They are to be paid remuneration on the basis of their qualification and experience. Besides, there is the possibility of duplication of effort, which unnecessarily may increase cost of production.

2. Decentralization Creates Conflict
In decentralization, the top level management puts more pressure on departmental managers to increase output and revenue. In such a situation, every department lays more emphasis on their own departmental goals instead of corporate goals. This may give rise to inter-departmental conflict and too much fragmentation creates problems in coordination and control.

3. Decentralization Is Unsuitable For Emergency Situation
In decentralization, lower and middle level managers are assigned authority only for routine decisions. Whenever they face complex and non-programmed problems they cannot take a decision due to limited authority.

4. Decentralization Maximizes Risk
In decentralization, decision making authority is delegated to the subordinate level. If subordinate level managers are unskilled and incapable, they may take wrong decision, which may increase the risks and result in losses.

5. Decentralization Is Unsuitable For Specialized Services
The concept of decentralization is not applicable in some types of services. It is not suitable for specialized nature of services like accounting, human resource, engineering, surgery etc.

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Advantages Of Decentralization

Decentralization has the following advantages:

1. Decentralization Facilitates Managers' Development
In decentralization, appropriate responsibility and authority is delegated to subordinate level managers. It gives them an opportunity to hone their skills and efficiency so as to get promotions. Therefore, decentralization creates the reserve of talency.

2. Relief To Top Managers
In decentralization, most of the routine managerial responsibilities are delegated to middle and lower level managers. It minimizes the excessive workload of the top managers. It gives sufficient time to the top managers to concentrate on non-programed decisions like planning, policy making, strategy formulation etc.

                                 Also read: Concept And Meaning Of Decentralization

3. Effective Control
In decentralization, it is convenient to set standards of performance. This helps to compare actual performance with standard performance more quickly. This helps in taking prompt decisions to correct deviations. This leads to maintaining effective control.

4. Possibility Of Better Decision
Decentralization delegates the decision making authority to the managers nearest to the level of operation. The managers working nearest to the operation are in a better position to understand the complexity of problems. This helps in taking a better decision to solve the problems.

                         Also read: Disadvantages Of Decentralization

5. Decentralization Facilitates Diversification
The addition of new product lines or expansion of existing lines of business develops complexity in an organization. This also develops a challenge to the top management. The top managers can meet such challenges by delegating authority to their subordinates. Top managers can only play the role of coordinators.

6. High Morale And Motivation
Decentralization is highly motivational as it gives the subordinates the freedom to act and take decisions. This develops among the subordinates a feeling of status and recognition and ultimately a feeling of dedication and commitment. This helps in maintaining high motivation and morale of subordinates.

                        Also read: Concept And Meaning Of Centralization

Concept And Meaning Of Decentralization

Decentralization is the systematic delegation of managerial authority to middle and lower level management according to their weightage of responsibility. In practical, it is not possible to delegate absolute authority to the lower level management. Top level management can delegate only substantial power to the lower level management. Therefore, every organization has to decide how much authority should be centralized and how much should be decentralized. Decentralization depends on the size and nature of the organization and responsibility vested on the lower level. The top level management has to delegate such degree of authority to the lower level so that quick decisions and their implementation are possible.

Therefore, decentralization may be known as the philosophy of scientific and systematic delegation of managerial authority to the middle and lower level managers in accordance with their responsibility. This philosophy states that the top level management should keep limited authority and delegate maximum authority to operating levels. Top management has to play the role of supervisor.

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Disadvantages Of Centralization

Disadvantages Of Centralization

The following are the main drawbacks or disadvantages of centralization:

1. Centralization Is Unsuitable For Large Organization
Centralization is impractical in large business organization having various branches in different locations. It is difficult to communicate managerial decisions to different operating levels in the management hierarchy. Top level managers cannot effectively supervise and control all the activities of the organization.

2. Manager Is Overburdened
In centralization, top managers are over burdened with authority and responsibility while managing each and every activity of the organization. He/she cannot devote sufficient time in other major issues. It tends to decrease working efficiency of the organization.

3. Possibility Of Power Misuse
Centralization of authority at the top level may result in under-utilization of power. Top level managers may exercise their powers on the basis of their personal judgement. This may lead to misuse of authority if the managers lack proper skills and ability.

4. Low Morale Motivation
In centralization. middle and lower level managers feel uncomfortable while performing the assigned task. They do not have the required authority to deal with problems effectively. They do not get any opportunity to show and develop their personality. The lack of motivation tends to affect the morale of subordinates.

5. Lack Of Environmental Adaptation
Business environment is dynamic and therefore, it changes according to time. In business, it is essential to take quick decisions to resolve problems of concerned departments or branches. Centralization is not applicable in dynamic environment as flexibility will not come promptly from the top level.

6. Inappropriate For Routine Decisions
In centralization, top level managers devote maximum time in taking routine decisions. Therefore, they cannot devote more time in non-programmed decisions. This will have a negative impact on the long term performance of the organization.

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Advantages Of Centralization

The following are the main benefits or advantages of centralization:

1. Centralization Facilitates Unified Decision
Top level managers take all decisions in centralization. It is not necessary to consult and take consent of subordinates while taking a decision. The subordinates perform activities on the basis of instructions which facilitates maintenance of uniformity and consistency in performance.

2. Centralization Simplifies Structure
In centralized organization, the structure tends to be simple and clear. It involves two levels- managerial and operating levels. Managerial level is responsible for decision making whereas operating level is responsible for execution.

3. Centralization Facilitates Quicker Decision
Centralization facilitates quicker decision as one manager takes all the decisions. Managers can take suggestions and guidance from experts and professionals, but the final decision is taken by him. Quick decision is essential for business success in competitive environment.

4. Economy In Operation
In centralization. many levels and positions of management are reduced. It minimizes overhead cost of the organization. It also helps in effective utilization of skilled, qualified and experienced members.

5. Centralization integrates Operation
Centralization helps to integrate and unify all the operations of the organization. The top level manager maintains close supervision of the subordinates and their functions. On the basis of requirement, a manager takes quick decision to maintain control over the activities of the employees.

6. Centralization Is Suitable For Small Firms
Centralization is highly appropriate for small business organization performing business in a competitive environment. In such organizations, managers can personally look after overall activities of the organization.

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Concept And Meaning Of Centralization


Centralization is known as the systematic reservation of decision making authority at the top level management. Centralization reduces the roles of subordinates and the top level assumes full authority of running business activities. Top managers have direct control over each and every activity of the organization while the decision making authority is also vested on them.

Centralizes facilitates a manager to keep in touch with all the activities of the organization and facilitates quicker decisions. This system is highly appropriate in small organizations performing business in a competitive environment. However, expansion of the size of the business creates complexities in business activities of the organization and in such a situation centralization becomes impractical. Top management needs to form departments and branches on the basis of nature of work and decision making authority should be delegated to the departmental heads.

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Decision Making Conditions

There are different conditions in which decisions are made. Managers sometimes have an almost perfect understanding of conditions surrounding a decision, but in other situations they may have little information about those conditions. So, the decision maker must know the conditions under which decisions are to be made. Generally, the decision maker makes decision under the condition of certainty, risk and uncertainty.

1. Certainty
Certainty is a condition under which the manager is well informed about possible alternatives and their outcomes. There is only one outcome for each choice. When the outcomes are known and their consequences are certain, the problem of decision is to compute the optimum outcome. Similarly, if there are more than one alternative they are evaluated by conducting cost studies of each alternative and then choosing the one which optimizes the utility of the resources. The condition of certainty exists in case of routine decisions such as allocation of resources for production, payment of wages and salary etc. There is a little ambiguity and relatively low chance of making and impractical decision.

2. Risk
A more decision making condition is a state of risk. In such a condition, managers have knowledge about alternative course of actions but outcomes are associated with probability estimates. It is more difficult to predict future conditions without full information, so the outcome of an alternative cannot be accurately determined. Therefore, managers can guess the probable outcome on the basis of their experience, research and other available information. They can choose an alternative with highest expected outcome. However, such decisions are largely subjective as no decision criteria are fully reliable. Decision making under conditions of risk is accompanied by moderate ambiguity and chances of an impractical decision.

3. Uncertainty
A state of uncertainty occurs when managers are unaware of the problem they face. They do not know all the alternatives, the risk associated with them or the likely consequences of each alternative. This uncertainty arises from the complexity and dynamism of contemporary organization and their environments. Managers have limited information to calculate the degree of risk, so statistical analysis is not possible. The condition of uncertainty arises when the organization introduces a new or innovative product or service, adopts new technology, selects new advertising program etc. To make effective decision in uncertain conditions, managers must acquire as much relevant information as possible and approach the situation from a logical and rational perspective. Intuition , judgment and experience always play major roles in the decision making process. However, decision under uncertainty is the most ambiguous for managers and there is more possibility of error.

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Barriers To Delegation Of Authority

The following are the common barriers in delegation of authority:

1. Reluctant To Delegate
Some managers are reluctant to delegate authority to subordinates. They believe that they can take a better decision than their subordinates. This belief is often found among those managers who have been recently promoted and those having superiority complex. They have no proper plan to delegate authority. In such a situation, subordinates will have less work and lose the commitment to implement the manager;s decisions.

2. Fear Of Losing Importance
Managers who feel comfortable with authority,fear to delegate authority. They feel that it will diminish their importance. Such managers delegate only that part of authority to subordinates which relates to their job responsibility. They retain their authority as a positional superior of an organization.

                          Also read: Advantages Of Delegation Of Authority

3. Loss Of Control
Some managers opine that they will lose control by delegating authority to their subordinates.They feel that if they delegate authority to their subordinates, they would not be sure to achieve assigned responsibilities from subordinates. Such fear is reasonable in case managers are incapable of getting the jobs done from others.

4. Mutual Distrust
Managers are often reluctant to delegate authority to subordinates if there is an environment of distrust in the organization.A manager must have confidence in his own ability to help, guide and control his subordinates before delegating authority. If a manager does not have the ability to make a sound decision he does not believe in his subordinates. He does not want to take risk to get jobs done from others.

                     Also read: Features Of Delegation Of Authority

5. Fear Of Subordinates 
Managers are reluctant to delegate authority if they fear that it will expose their shortcomings. They feel that their subordinates will perform better and may create problems in their own career. They have no self-confidence and do not want to face the competitive environment.

6. Incompetent Subordinates
Some subordinates are often unwilling to accept delegated authority because of lack of self-confidence. They fear of making mistakes in their performance. It is the responsibility of the superior to develop their self confidence by guiding them and also creating a supportive environment.

                           Also read: Concept And Meaning Of Delegation Of Authority

7. Lack Of Motivation
Lack of motivational environment discourages subordinates to take responsibility and accept authority. Such environment is found in organizations where there is lack of reward and judgement system.

Advantages Of Delegation Of Authority

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.

                       Also read: Concept And Meaning Of Delegation Of Authority

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.

                   Also read: Features Of Delegation Of Authority

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.

Features Of Delegation Of Authority

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.

                    Also read: Concept And Meaning Of Delegation Of Authority

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.

                  Also read: Advantages Of Delegation Of 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.

                 Also read: Barriers To Delegation Of Authority

Concept And Meaning Of Delegation Of Authority

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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Approaches To Decision Making

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

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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Significacne Or Importance Of Decision Making

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

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.

                       Also read: Significance Of Decision Making

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.

                         Also read: Decision Making Styles

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.

                   Also read: Approaches To Decision Making

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.

                      Also read: Decision Making Conditions