Objective and Decision making

What is Objective?

Although some theorists try to draw a fine distinction between goals and objectives, managers usually use the terms interchangeably. Goals or objectives are considered important ends towards which organisational and individual activities are directed.
An objective may be defined as a specific commitment to achieve a measurable result within a given time-period.
According to many experts, objectives are the single most important feature of the planning process. All managers must be able to write good objectives, to be aware of their importance, and to understand how objectives combine to form a means-ends chain.
According to Anthony P. Raia, an authority on Managing By Objectives (MBO), “As far as possible, objectives should be expressed in quantitative, measurable, concrete terms, in the form of a written statement of expected results to be achieved within a given period of time.” In other words, objectives should represent a firm commitment to attain something specific. So a well-written objective should state what is to be accomplished and when.

Nature of Objective

Objectives mean end results, and overall objectives require to be supported by sub-projects. Thus, objectives tend to constitute a hierarchy as well as a network.
A hierarchy ranges from a broad aim to specific individual objectives. The highest peak of the hierarchy is to contribute to the welfare of the people by providing goods and services at a reasonable cost. The next purpose of business might be to supply convenient and cheaper transportation for common people. The stated purpose might be to produce, market, and service automobiles.
A Network of Objectives: If objectives or goals are not interconnected and if they are not mutually supportive, people are quite often likely to pursue paths that may seem good for their own respective departments but may be detrimental to the organisation as a whole. That is why both objectives and planning programs normally form a network of expected results and events.

Management by Objective (MBO)

Management by objectives (MBO) has been defined by Weihrich and Koontz as: “The comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed toward the effective and efficient achievement of organizational and individual objectives.”
MBO is a comprehensive management system based on measurable and participatively set objectives. It has come a long way since it was first suggested by Peter F. Drucker in 1954 as a way of promoting managerial self-control. MBO is a management technique for increasing employee involvement in the planning and controlling activities. In MBO, the employee is asked for the ways by which the objectives set by his/her participation can be best achieved.

The MBO Cycle

The four steps or stages of the MBO process are also called the MBO cycle. The steps illustrated below:

• Step 1: Setting objectives: A hierarchy of challenging, fair, and internally consistent objectives is the necessary starting point for the MBO cycle because it serves as the foundation for all that follows. All objectives, according to the principles of MBO, should be reduced to writing and kept aside for future reference during steps 3 and 4. Setting objectives under MBO starts at the top of the managerial pyramid and filters down, one layer at a time.
  The main contribution of MBO to the objective-setting process is its emphasis on participation and involvement of subordinates. There is no place in MBO for either a domineering manager ordering people or a passive manager leaving all at the discretion of the subordinates. Rather, MBO calls for a negotiation of objectives between superiors and subordinates on a give-and-take basis.

• Step 2: Developing action plans: With the development of action plans and addition of these statements to the objectives participatively set, the planning phase of MBO comes to an end. Managers, at each level, tend to develop plans that incorporate the objectives established in step-1. It is the responsibility of higher managers to make sure that plans of their direct subordinates complement rather than conflict with one another.

• Step 3: Periodic review: Attention now turns to step-3 as plans go into action requiring the following-up and monitoring of performance. Face-to-face meetings between superior and subordinate at 3-, 6-, and 9-month intervals should be held regularly. These periodic check-ups help to see whether a particular set of objectives is still valid or needs revision or updating under the changed circumstances. Periodic check-ups also provide managers with excellent opportunities to give subordinates required and well-considered feedback.

• Step 4: Performance appraisal: According to Kreitner, “At the end of one complete cycle of MBO, typically one year after the original goals are set, the final performance is matched with the previously agreed-upon objectives. The pairs of superior and subordinate managers who mutually set the objectives one year earlier meet face to face once again to discuss how things have turned out. MBO calls for emphasis on results, not on personalities or excuses.” Kreitner further adds that the control side of the MBO cycle is completed when success is rewarded with promotion, incentive payments, or other suitable benefits and failure is noted to take corrective action in the future.

Principles of MBO

• Principle of participation: Motivation tends to increase with increased participation in decision-making and objective setting.
• Principle of feedback: Motivation tends to increase when employees know where they stand.
• Principle of reciprocated interest: Motivation tends to increase when the pursuit of organizational objectives goes hand in hand with the achievement of personal objectives.
• Principle of recognition: Motivation to achieve organizational goals or objectives tends to increase when employees are recognized for their contribution.

The MBO cycle repeats itself, after every one round, each cycle contributing to the learning process. As a common practice, MBO starts at the top and introduces a new layer of management to the MBO process each year. Experience shows that adding several layers of management into MBO all at once frequently causes confusion, dissatisfaction, and failure. Actually, five or more years are typically taken even for a moderate-sized organization to evolve a full-blown MBO system that binds together such areas as planning, control, performance appraisal, and the reward system. Votaries of MBO believe that the natural by-products of a proper MBO system are higher productivity and greater motivation resulting from the use of realistic objectives, more effective control, and self-control of the employees.

What is Decision-Making?

A manager faced with two or more feasible alternatives must decide which one to select. Decision-making is, therefore, the process of identifying a set of feasible alternatives and choosing a course of action from them. Weihrich and Koontz defined decision-making as the selection of a course of action from among alternatives. According to them, “It is the core of planning. A plan cannot be said to exist unless a decision - a commitment of resources, direction, or reputation - has been made.”

Decision Making: The Process and Managerial Practices

In this section, we shall examine the main four steps involved in the decision-making process in greater detail. These steps include:
(1) recognizing the need for a decision i.e., problem awareness, definition, and understanding;
(2) generating or searching for alternatives;
(3) evaluating each alternative; and
(4) choosing from among the alternative solutions (choice-making).

• Step one: recognizing the need for a decision: The first step in the decision-making process consists of recognizing that a decision is needed. (Much of the following discussion on the decision-making process will assume the existence of a problem. It is important, however, to remember that a number of occasions, including opportunities as well as problems, can give rise to the need for managerial decision-making.) Problem recognition begins when a decision maker is alerted by a signal that a decision is needed.

• Step two: generating or searching for alternatives: After a problem has been identified, diagnosed, and understood, a manager is ready to move into the second stage of the decision-making process — the generation of a set of alternative solutions. In developing these solutions, decision-makers first must specify the goals that they hope to achieve through their decision.

• Step three: evaluation of alternatives: Appropriate alternatives having been found, the next step in planning is to evaluate them and choose the right one which will best contribute to goal achievement.

• Step four: choosing an alternative: After all the possible alternatives have been evaluated, managers are left with only one remaining viable alternative, which becomes their ultimate decision. Normally, however, several alternatives remain under consideration after the evaluation process. Thus, the final stage in the decision-making process involves making judgments and choices.

Selecting an Alternative: Three Approaches

• Experience: Experience is a great guide. Reliance on past experience, therefore, plays a comparatively large role in decision-making.
• Experimentation: Trying one of the alternatives and seeing how it goes is a usual way of choosing an alternative.
• Research and Analysis: One of the best techniques for selecting from among alternatives when major decisions are involved is research and analysis.

Decision-Making Conditions

Decisions are made under one of three conditions: Certainty, Risk, and Uncertainty.

• Certainty: Under conditions of certainty, the manager has enough information to know the outcome of the decision before it is made.
• Risk: Most management decisions are made under conditions of risk.
• Uncertainty: Uncertainty remains in decision-making when the manager does not know anything about the outcome of the decision to be taken because of a lack of information.

Limitation of Decision Making

Decision-making is a major part of planning. As a matter of fact, given an awareness of an opportunity and a goal, the decision process leading to making a decision might be thought of as (1) premising, (2) identifying alternatives, (3) evaluating alternatives in terms of the goal sought, and (4) choosing and alternative that is making a decision.

CASE Study: OLYMPIC TOY COMPANY

"I expect all the managers in my department to act completely rationally in every decision they make", declared Eleanor Johnson, Vice President for marketing for the Olympic Toy Company. "Every one of us, no matter what his or her position, is hired to be a professional rationalist, and I expect all of us not only to know what they are doing and why but to be right in their decisions..."