Decision Making - Meaning and Important Concepts

Every organization needs to make decisions at one point or other as part of managerial process. Decisions are
made in the best interest of the organization. For that matter, decisions made by the organization are to lighten
the way forward. Be it strategic, business activities or HR matters, processes of making decisions is complex,
involves professionals of different genre. While small organization involves all levels of managers, complex
organizations largely depend on a team of professionals specially trained to make all sorts of decisions. But
remember, such a body alone cannot come out with final decisions. Here, the point is, decision making process
is cumulative and consultative process. The process, on the whole, bears its pros and cons and would by and
large emanate results and consequences in the organizations overall growth and prospects.
Decisions are taken to support organizational growth. The whole fabric of management, i.e. its day to
day operation is rightly built on managerial decisions. Top notch companies, as evidenced by their
functions, effective communication tools are utilized in addition to normal consultation process to make
decisions that would have large scale implications on the companys prospects.
Discussions and consultations are two main tools that support and eventually bring out decisions. For instance
to take a decision on how to embark on new business activity suggested by strategic management team must
have developed through series of consultative process, which is now available with implementation team. Here
we see the cumulative effect of decision taken at one point by a different body of affairs. Decision taken by
strategic managers is to push new and innovative business line or initiative. At this point the decision taken by
such team becomes consultative point for discussion for implementation professionals. There is lot to debate,
research and finalize. Is the new proposal viable ? Is it innovative enough ? Can there be growth stimulant in
the strategies proposed ? Handle-ful of such questions evolved from the decision taken by strategic group has
reflective influence on the next level of managerial consultations and meetings. Let us accept, at this point of
discussion, that proposals submitted by business development team would largely depend on another set of
deliberations in the board room.
Thus, the final decision to roll out a product or service is through cumulative interim decisions taken by various
internal and external parties. And also the final decision is reflective and founded on researches and
consultations. Whole process is a chain affair where one decision taken at one point and at one level shall have
far reaching implications in the way an organization moves forward.
As a matter of fact, capable of taking critical decisions is one of the many attributes that every manager should
have, be it top level or middle or entry level. By nature a human being during his existence and by virtue of his
instinct makes decisions for his survival, as social psychologists put it. By and large, managers are polished
individuals to take decisions to affect others, ie the organizations existence and growth thus is annotative with
human endeavor to live and succeed. Success succeeds on the decisions taken, be it by an individual or an
organization.

What is Decision Making

Decision-making is an integral part of modern management. Essentially, Rational or sound decision making is
taken as primary function of management. Every manager takes hundreds and hundreds of decisions
subconsciously or consciously making it as the key component in the role of a manager. Decisions play
important roles as they determine both organizational and managerial activities. A decision can be defined as a
course of action purposely chosen from a set of alternatives to achieve organizational or managerial objectives
or goals. Decision making process is continuous and indispensable component of managing any organization
or business activities. Decisions are made to sustain the activities of all business activities and organizational
functioning.
Decisions are made at every level of management to ensure organizational or business goals are achieved.
Further, the decisions make up one of core functional values that every organization adopts and implements to
ensure optimum growth and drivability in terms of services and or products offered.

As such, decision making process can be further exemplified in the backdrop of the following definitions.

Definition of Decision Making

According to the Oxford Advanced Learners Dictionary the term decision making means - the process of
deciding about something important, especially in a group of people or in an organization.
Trewatha & Newport defines decision making process as follows:, Decision-making involves the selection
of a course of action from among two or more possible alternatives in order to arrive at a solution for a
given problem.
As evidenced by the foregone definitions, decision making process is a consultative affair done by a comity of
professionals to drive better functioning of any organization. Thereby, it is a continuous and dynamic activity
that pervades all other activities pertaining to the organization. Since it is an ongoing activity, decision making
process plays vital importance in the functioning of an organization. Since intellectual minds are involved in the
process of decision making, it requires solid scientific knowledge coupled with skills and experience in addition
to mental maturity.
Further, decision making process can be regarded as check and balance system that keeps the
organisation growing both in vertical and linear directions. It means that decision making process seeks a
goal. The goals are pre-set business objectives, company missions and its vision. To achieve these goals,
company may face lot of obstacles in administrative, operational, marketing wings and operational domains.
Such problems are sorted out through comprehensive decision making process. No decision comes as end in
itself, since in may evolve new problems to solve. When one problem is solved another arises and so on, such
that decision making process, as said earlier, is a continuous and dynamic.
A lot of time is consumed while decisions are taken. In a management setting, decision cannot be taken
abruptly. It should follow the steps such as
1.
2.

Defining the problem

Gathering information and collecting data

3.

Developing and weighing the options

4.

Choosing best possible option

5.

Plan and execute

6.

Take follow up action

Since decision making process follows the above sequential steps, a lot of time is spent in this process. This is
the case with every decision taken to solve management and administrative problems in a business setting.
Though the whole process is time consuming, the result of such process in a professional organization is
magnanimous.

Decision Support Systems Introduction, Categorization and

Development
When it comes to good decision making, relying too heavily on automatic decisions stemming from perception
or depending too much on conventions when information is bombarded on to us from all sides can be
dangerous. Sometimes, you fail to either notice or seek out crucial information that supports decision making.
This may be because of our biasness or shortage of time, funds and other resources.
However, when it comes to organizational decision making, perhaps you wouldnt want to take risk. The
reasons are obvious. One wrong decision can make many things go awry, including your brand image, product

lifecycle, financial standing and employer brand. In many situations, youre unable to apply fundamentals of
economics, statistics and operations research to make lucid choices.
So, you need some knowledge based systems that support business decision making activities. This is where a
decision support system comes into picture. It is a computer-based system that helps you make planning,
manufacturing, operations and management decisions, based on information available. But you must
remember that these systems are not the decision makers. They just aid in decision making, by offering
insights that you may be missing and providing exact calculations. The ultimate decision maker is only you.
Say, for example, you need to devise a supply chain movement strategy. How will you do this? A DSS analyzes
the stock of inventory and production movement. Basis the data available, it compares the outcomes of
different decisions, helping you figure out what may work best currently. It helps you establish a supply chain
movement that works.
Lets take another example. Suppose you want to optimize your sales. How will you do it? Obviously, youll
make some assumptions, collect data, facts and figures, generate reports, examine patterns and finally make a
decision. When you do it manually, you never know what mistakes youre committing. A DSS, in such a
situation, can gather and analyze data and make predictions by monitoring existing patterns. It speeds up the
whole process, giving you insights into how you can optimize your sales process.

What is a Decision Support System (DSS)?

Now that we know what a decision support system does, lets understand what exactly it is and how it works. A
decision support system is:

a computer-based application or program

that compiles, combines and analyzes raw data, documents, fundamentals of social science, applied
science, mathematics and managerial science, and personal knowledge (of decision maker/s)

to identify problems and determine their solutions

in order to facilitate optimal decision making

A decision support system is an interactive computer application that has complete access to information about
your organization. When used, it offers comparative figures between one period and the next. It projects
revenue figures based on assumptions related to product sales. A DSS is smart enough to help you understand
the expenses involved in and consequences resulting from different decision alternatives.
A decision support system helps overcome the barriers to a good decision making, including:

lack of experience
biasness

shortage of time

wrong calculations

not considering alternatives

Brief History of Decision Support System

The journey of decision support system began in the late 1960s with model-driven DSS. 1970s saw theory
development in this area and it was in mid 1980s when implementation of spreadsheet based DSS, financial
planning systems and Group DSS took place. Late 19080s and early 1990s saw the evolution of business
intelligence, data warehouses, ODSS (Organization Decision Support System) and EIS (Executive Information

System). Mid 1990s marked the beginning of knowledge-based and web-based decision support systems. The
Decision Support Systems can be divided into following categories:
1.

Model-driven DSS
A model-driven DSS was based on simple quantitative models. It used limited data and emphasized
manipulation of financial models. A model-drive DSS was used in production planning, scheduling and
management. It provided the most elementary functionality to manufacturing concerns.

2.

Data-driven DSS
Data-driven DSS emphasized the access and manipulation of data tailored to specific tasks using
general tools. While it also provided elementary functionality to businesses, it relied heavily on timeseries data. It was able to support decision making in a range of situations.

3.

Communication-driven DSS
As the name suggests, communication-driven DSS uses communication and network technologies to
facilitate decision making. The major difference between this and the previous classes of DSS was that
it supported collaboration and communication. It made use of a variety of tools including computerbased bulletin boards, audio and video conferencing.

4.

Document-driven DSS
A document-driven DSS uses large document databases that stores documents, images, sounds,
videos and hypertext docs. It has a primary search engine tool associated for searching the data when
required. The information stored can be facts and figures, historical data, minutes of meetings,
catalogs, business correspondences, product specifications, etc.

5.

Knowledge-driven DSS
Knowledge-based DSS are human-computer systems that come with a problem-solving expertise.
These combine artificial intelligence with human cognitive capacities and can suggest actions to users.
The notable point is that these systems have expertise in a particular domain.

6.

Web-based DSS
Web-based DSS is considered most sophisticated decision support system that extends its capabilities
by making use of worldwide web and internet. The evolution continues with advancement in internet
technology.

As you can see, previously, the focus was on speeding up the decision making; however, as the concept
evolved, it shifted to building interactive computer-based systems that could utilize data and offer insights to
solve ill structured problems. The definition, design, intelligence and scope of DSS continue to evolve with time.
The modern-day DSS is more intricate and equipped to help make more complex decisions.
Decision support systems have gained immense popularity in various domains, including military,
security, medicine, manufacturing, engineering and business. These can support decision making in
situations where precision is of importance. Additionally, they provide access to relevant knowledge by
integrating various forms and sources of information, aiding human cognitive deficiencies. While DSS employs
artificial intelligence to address problems, you shouldnt overestimate its importance. Its a way to get
comparative figures basis some or a combination of some formal techniques. The end decision remains with
you.

Categorization/Classification of DSS
We have already seen the classification of decision support systems on the basis of technologies used in the
history section. Lets now look at the categorization on the basis of nature of operations:

1. File Drawer System: As the name suggests, a file drawer decision support system provides
information useful for making a specific decision. It works like a file drawer where different types of
information are stored under different names or categories.
2. Data Analysis Systems: These decision support systems are based on a formula; and therefore, are
used to make comparative analysis. These make use of simple data processing tools, such as
inventory analysis.

3. Information Analysis System: This kind of decision support system analyzes different sets of data to
generate informational reports that can be used to assess a situation for decision making.

4. Accounting and Financial Support System: This type of support system is based on to keep track of
cash and inventory.

5. Representation or Solver Model: This type of system performs or represents decision making in a
particular domain or for a specific problem. It calculates and compares the outcomes of different
decision paths. The decision maker can conduct a what if analysis and make an informed decision
basis on the outcomes generated.

6. Optimization Model: This DSS is based on stimulated models, majorly providing guidelines for
operations management. The focus is on providing optimal solutions on job scheduling, product mix
and material mix decisions.

7. Suggestion System: This type of support system suggests optimal decision for a particular situation
by assisting in collecting and structuring data.

Categorization of DSS on the Basis of Inputs

Text-Oriented DSS
Database Oriented

Spreadsheet Oriented

Rule Oriented

Solver (specific situation) Oriented

Compound/Hybrid: This support system combines two or more structures from above to offer multiple
functionalities.

Categorization of DSS on the Basis of Support Offered

Personal DSS
Group DSS

Organizational DSS

Categorization of DSS on the Basis of Type and Frequency of

Decision Making

Institutional DSS: An institutional decision support system supports recurring decisions on an

ongoing basis. Basically, this is for programmed decisions, which are made on daily basis. For
example, establishing routine for handling technical problems, taking disciplinary actions, unit
manufacturing, a mechanic process of troubleshooting, etc.
Ad-hoc DSS: An ad-hoc decision support system supports one kind of decision in an unanticipated
situation. The decision made is unique to a problem. This type of system is used to support nonprogrammed decisions as the information available is incomplete.

Components of a Decision Support System

Like any other software system, DSS also has components and phases of development. No matter what kind of
decision support system youre looking to develop, you must plan around these four components:

Input: What kind of input does it require to carry out the analysis? As mentioned earlier, it can be rule,
problem, spreadsheet, text or database oriented.
User Knowledge/Expertise: Whether inputs will require manual analysis by the user or not

Output: Should the outcomes be comparative or generic?

Decisions: Whether it should be a suggestion support system? Or you just want it to analyze the data
and outcome of different actions?

Designing and Building a Decision Support System

A lot goes into designing and building a decision support system. It works as a support system only after it is
fed intelligence during its development. Developing a DSS is a complex process and thus, takes longer. It goes
repetitively through three stages - inputs, activities and outputs during each phase of system development
lifecycle. You provide an input, carry out the desired activity and measure the output. You move further, if it
produces the right output or else you come back to the input phase and make adjustments.

A DSS framework design and development goes through these stages:

1.

Intelligence
At this stage, the objective is to search for problems/situations/conditions that call for decision.

You, as a business, are expected to identify and define the problem context for which support is
required. You must define the objectives and available resources, so that the outcomes generated
meet your expectations.
2.

Design
This stage deals in analyzing all possible actions, along with the determination of system design and
system construction.

System design includes determination of components, platform, function libraries and special
languages while system structure is about deciding the prototype approach. This stage also includes
identifying hardware requirements. The development starts here.
3.

Choice
Once you shortlist and analyze all possible courses of actions in step 2, now is the time to choose the
best from among them, depending upon your business objectives and results generate.

4.

Implementation
This is the final stage where testing, evaluation, adjustments and deployment take place. However, this
is the final product but this can be tweaked, refined and upgraded basis your activities and
requirements.

When developing a custom DSS, these are important factors that must be kept in mind:

Data management functions

Available hardware platforms

User interface

Compatibility with other applications

Cost

A decision support system helps improve your bottom line, only if its customized to your specific needs and is
implemented correctly.

Individual Decision Making - Pros and Cons

Individuals have a tendency to think and question before performing. This is fruitful in analysis and forecasting
of individuals behaviour. Individual decision making has certain pros and cons, few of which are mentioned
below:

Pros of Individual Decision Making

An individual generally makes prompt decisions. While a group is dominated by various people,
making decision-making very time consuming. Moreover assembling group members consumes lot of
time.
Individuals do not escape responsibilities. They are accountable for their acts and performance. While
in a group it is not easy to hold any one person accountable for a wrong decision.

Individual decision making saves time, money and energy as individuals make prompt and logical
decisions generally. While group decision making involves lot of time, money and energy.

Individual decisions are more focused and rational as compared to group.

Cons of Individual Decision Making

A group has potential of collecting more and full information compared to an individual while making
decisions.
An individual while making any decision uses his own intuition and views. While a group has many
members, so many views and many approaches and hence better decision making.

A group discovers hidden talent and core competency of employees of an organization.

An individual will not take into consideration every members interest. While a group will take into
account interest of all members of an organization.

Corporate Decision making

Corporate decision making happens at various levels in organizations and can be top down or
bottom up. The difference between these two styles of decision making is that the top down decision
making is done at the higher levels of the hierarchy and the decisions are passed down the corporate

ladder to be implemented. On the other hand, bottom up decision making is done by giving autonomy
to the middle managers and the line managers to take decisions based on the conditions and
circumstances existing in their teams. In many organizations, what we see is a top down decision
making in the realms of policy, strategic focus, direction in which the organization has to proceed and
bottom up decision making about the day to day running of the teams.

It needs to be remembered that the middle management is often called the sandwich layer because
they have to implement the decisions made above and at the same time have to decide about how to
run the teams and have to communicate them to the lower levels as well.

The point here is that in any process of corporate decision making, the actual implementers play a
critical role since the best laid plans of the top management can go awry in case there is no
commitment from the middle management. Hence, many organizations organize off site meetings at
resorts and other places where the senior management briefs the middle management about the
decisions that they have taken and how it would impact the organization.

Corporate decision making is also characterized by consensus or the lack of it. Like in the real world,
corporations often have power centers and groups that have their own agendas and hence arriving at
a consensus can be cumbersome for the CEO or the Chairman of the Board of Directors. It is because
of this reason that many corporations witness periodic restructurings with regards to organizational
structure and with regards to turnover among the top management. In recent months, Infosys has
seen rapid and often turbulent situations in the company because of the power struggles at the top as
well as lack of consensus among the top management about the direction that the company ought to
take.

The other aspect related to corporate decision making is that many organizations thrive on leaders
who have a halo around them and hence decision making is smooth because the rival power centers
often concede to the leaders charisma or his or her ability and vision. Again, Infosys has seen this
happen when with the retirement of its legendary founder, N R Narayana Murthy; the company is going
through a bad phase with competing factions jostling for control. Abroad, Apple is an example of a
company that relied on the halo effect of its founder, Steve Jobs and once he passed away, there is
some uncertainty about the way the company should take in the market.

In conclusion, corporate decision making is successful as long as there is a glue to bind the
organization together in the form of charismatic leaders or an organizational culture that values
coherence and imposes stability. Once any of these conditions are removed, then the organizations
fall into a self-defeating trap wherein the process of corporate decision making is impaired leading to
the loss of competitiveness of the company.

Conflict Resolution and Decision Making

Any decisions taken at any level have to take into account the conflicting needs of the individuals who
are affected by the decisions and hence conflict resolution is a part of the decision making process.
How well the conflicts are resolved depends on the skill and leadership traits of the decision maker.
After all, any decision that is taken is to balance competing interests and is essentially an allocation of shared
resources among the different groups. The point here is that in any organization there are scarce resources
that need to be allocated among competing groups and hence the decision maker has to ensure that all the
needs and concerns of the different groups are taken into consideration when making the decision.
Since most decisions involve some emotional component as well, the decision makers have to be especially
sensitive to the needs of the people who are affected by the decisions.
Consensual decision making ensures that most concerns of the different groups are heard and taken
into account. However, in the real world organizations, decision making by consensus might not be feasible
since each group has its own agendas. Hence the decision makers have to ensure that the decisions that they

take involve some amount of consultation and some amount of overriding the individual agendas. The reason
being that though individual concerns can be taken into account, the decision makers have to keep the
interests of the organization in mind and hence proceed accordingly. This is needed so as to prevent
individuals and groups hijacking the decision making process with their agendas.
In most organizations it is common for the decision makers to elicit as much information as possible from the
individuals and then only take the decision so as to provide balance and grievance redressal to the affected
parties.
As this article has discussed, conflicts are inevitable when decisions are taken and the best way to deal with
conflicts is to resolve them to the satisfaction of the aggrieved parties. However, this is easier said than done in
this competitive world where nobody is willing to lose out on lucrative resources and forego their chances. So it
takes quite a bit of skill and managerial abilities not to mention leadership traits to ensure that the decisions
result in amicable settlements among the competing groups. The point here is that while it is not possible to
please everybody, it is possible to give them a fair hearing and be patient with them so as to give an impression
of consensual decision making.
In extreme cases when the competing groups do not agree or abide with the decision, it is left to the higher-ups
in the organization to play the role of peacemakers. This is the process of appeal to the senior management as
part of the concerns and grievance redressal. This is an essential component of the decision making process in
organizations and only when there is active recourse to appeal can true decision making work.

Steps in Decision Making Process

Decision making process is like a school exam. Those who take good decisions will pass the exam and the rest
who does not take right decisions will have to bear the consequences. Being able to take good decision is
important for everyone, whether he/she is a student, teacher, manager, principal, president, leader of any
institution etc. A student has to take decisions about his career, a president has to take decisions regarding his
countrys benefit, and a manager has to take decisions regarding his company and likewise the leader of any
institution. So every single person has to pass this step in order to progress in their field.
The meaning of decision in Latin is to cut off. This means that from all the available alternatives you choose
one thing and then cut off from all the other alternatives. Due to this, the decision making process sometimes
becomes very difficult. Choosing the right option from all the available alternatives is very hard to do.
Decision making process requires thinking process, time, efforts, resources and also a little bit of knowledge
and past experiences. Thinking process plays an important role in decision making process because it allows
you to judge each and every thing. Timing is also important.
Taking right decisions on right time can save you from any trouble. Taking too little time to take decisions or
taking too much time to execute your decision can cause many problems for you. Decision making processes
also requires knowledge, experience and research. If you have knowledge, you can find out different
alternatives for the problem faced. Making decisions without having proper knowledge about the problem can
cause difficulties.
In our view decision making power is the key to progress in life. You might have seen many people who do not
take proper decisions and then they have to suffer. On the other hand people who have this decision making
power, continues to progress in their life. Not all of us have this decision making power. We try to make right
decisions but sometimes we make mistakes because we dont know the steps that we should follow during the
decision making process. So in order to take right decisions, it is important that we should know all the steps of
decision making process and follow them.
The decision making process involves the following steps:
1.
2.

Curious Observation
Existence of Problem

3.

Goals & Planning

4.

Search, Explore & Gather the Evidence

5.

Generate Creative & Logical Alternative Solutions

6.

Evaluate the Evidence

7.

Make the Educated Guess (Hypothesis)

8.

Challenge the Hypothesis

9.

Reach a Conclusion

10. Suspend Judgment

11. Take Action
These steps will help you to take proper decisions
Each of these steps will be explained one by one in further articles. Anyone who wants to be a good decision
maker should follow these steps. Whether your problem is big or small these steps will show you the right path
to solve your problem and will lead you towards progression.

Decision Making in an Uncertain World

Managers in contemporary organizations are confronted with uncertainty and ambiguity in their everyday lives.
Not only do they have to contend with rapidly changing trends and fluid situations, the data they get from the
ground or from market research becomes redundant with no time. This has given rise to confusion and chaos
in the way organizations approach the future. This situation can be remedied by the use of scenario based
decision-making where the managers draw up possible scenarios that the company might have to contend with
in the short term, medium term, and longer term.
By drawing up scenarios that consist of simulations of the best-case situation and the worst-case
situation, the managers would be better able to take the right decision when the situation manifests
itself. The point here is that looking into the future is impossible except for oracles and clairvoyants. Hence,
some sort of grip on the future must be firmed up by planning for all possibilities.
Over the last couple of years, global businesses had to contend with multiple economic shocks starting with the
bankruptcy of the investment bank, Lehmann Brothers that nearly brought down the global financial system.
Next, the Eurozone crisis erupted that threatened to bring entire governments to their knees. Now, we have the
specter of diminishing resources and runaway inflation. In this context, it becomes important for managers to
draw up scenarios that would happen with a certain degree of probability. For instance, it would be better for
managers to think of the eventuality of Greece leaving the Eurozone and then planning for it accordingly. For
managers in sectors that do not have exposure to financial instruments in a major way (after all, which sector is
immune from financial shocks?), they can simulate models and scenarios where a war in the Middle East is
predicted and then base their strategies accordingly.
The point here is that when there is so much uncertainty, it becomes tough to anticipate events. Hence, by
drawing up scenarios that simulate the worst and the best as well, decisions can be taken that would derive
advantage to the organizations. When one adds complexity to the uncertainty and ambiguity that pervades the
current world, one is even more muddied and muddled to take decisions. For this, managing the present, it is a
challenge and hence many organizations leave future forecasts to consultants and management experts.
However, this need not be the case and in-house expertise can be developed to deal with emerging scenarios.
A case in point is NASSCOM (the Apex body of IT and ITES companies in India) that has been advising IT
companies in India to plan for the downturn and the possible aftershocks from the Eurozone crisis and the

upcoming fiscal cliff in the United States. NASSCOM has also been asking IT companies to draw up
scenarios for these events that if not planned for have the potential to blow up on everyones face.
Unfortunately, many organizations are rushing into the future without any thought or idea on how they would
deal with Black Swan events. A Black Swan event is a low probability but high impact event that can surprise
people with its occurrence.

Decision Making Dilemma Managers Face: How to Grow Companies in a

Time of Crisis
In the previous articles, we discussed how decision making in these times is fraught with risk, uncertainty, and
ambiguity. In this article, we examine a key dilemma facing managers in these times when economic conditions
are gloomy. For starters, managers face the unenviable task of returning high profits in a time of
inflationary pressures. This means that your company has to grow more than the prevailing rate of inflation if
real returns have to be made. For instance, if the inflation rate is 10%, then the companys growth rate must be
more than that and more importantly, the percentage increase in net profits must also be more than that if the
real return on the capital has to be positive. This is the reason why some stocks perform well when compared
to the others, as their real rates of return are more than the inflationary rate.
Next, managers also face the dilemma of rising costs of inputs, increased taxation, and competition
from around the world.
The point here is that since governments around the world are raising the taxes as a way to increase the
revenues, which means that all the input costs go up leading to a cascading effect on the bottom lines of the
companies. Further, with competition from lower wage and lower cost centres becoming more intense,
managers in many multinationals and homegrown companies are faced with a situation where they have to not
only grow more than the others, but also cut costs in the process. The point here is that companies can either
increase bottom line numbers by increasing revenues and making more profits or cut costs to increase the
profitability of their companies. The ideal scenario is where they can increase the profits and decrease costs at
the same time, which would lead to Nirvana for the managers.
Finally, in recessionary times, companies have to do with consumers who spend less and demand
more. This means that they have to contend with decreasing sales and increased discounts that have
to be passed on to the consumers. Hence, the double whammy of decreased profits and decreased
profitability means that managers have a tough task on their hands. Moreover, with less consumer purchases,
deflation sets in where the prices are low but consumers do not have the money to spend. Hence, in any case,
economic crises extract a heavy toll on companies and hence managers face a headache when confronted
with decision-making choices.
Of course, the gloomy scenarios outlined here need not be the end of the world situations and there are ways
and means to beat the gloom and ride the recession. Innovation is one aspect that companies can adopt to
adapt to the tough market environment. Apart from that, companies can also optimize their current processes
and reengineer their workflows so that efficiencies and synergies result which create new value for them. They
can also rationalize their cost structures so that unnecessary and redundant expenses are eliminated. Finally,
they can also focus on making their supply chains that much more effective and efficient.

Project Management - Definition and Important Concepts

Project Management is the art of managing all the aspects of a project from inception to closure using
a scientific and structured methodology. The term project may be used to define any endeavor that is
temporary in nature and with a beginning or an end. The project must create something unique whether it is a
product, service or result and must be progressively elaborated. As the definition implies, not every task can be
considered a project. It would be worthwhile to keep this definition in mind when categorizing projects and
studying their role in the success of the organization. With the above definition of the project, one gets a clear
idea on what a project is.

Program Management is defined as a department that centralizes the management of projects. What
this means is that the PMO or the Project Management Office is a repository of all the projects that are being
executed in an organization. Program Management serves the CIO (Chief Information Officer) by providing him
or her with regular status updates regarding the progress of all the projects in the company.
The PMOs role is to ensure that the projects are financially viable and to raise an alert whenever there is a
possibility or occurrence of a cost overrun. The PMO also keeps tab on the billing and other details that are
concerned with the project. Thus, the PMOs function is to oversee the projects coming under its domain and
act as a kind of monitoring agency for them. In the current scenario, there is a need for visionary leadership by
the CIOs in addition to the technical leadership.
Technical leadership is the ability to spot trends in the technical space and leverage them for the success of the
project. This involves choosing the right technology and being able to stay ahead of the curve with respect to
new technologies. On the other hand, program visionary leadership is needed to control costs and effectively
manage productivity increases and tighter integration of processes. This is relevant in the context of the
ongoing economic crisis where the accent is on cutting costs and improving the bottom line.
The role of a project manager is akin to that of a conductor in a symphony. Individually each of the artists
knows what has to be done for his or her role. But, there needs to be a person who has the overall big picture
or the collective vision to make the performance a success. Similarly, the project manager drives the entire
project team in pursuit of common goals.

The Project Managers role is to ensure that the overall objectives of the project are achieved
with the participation of each individual member. The project manager is like the Prima Donna
and his or her acumen depends on how well he or she can leverage the strengths of the
individual members while minimizing the impact of their weaknesses. Program managers take
the same view but at a much higher level. Their job is on the overall bottom line for the division
or the company and they drive the individual project managers. This is similar to that of a
pyramid where the CIO or the program manager sits on the apex and the project manager at the
next level, project leads further down and so on.

What is a Project
According to the PMBOK (Project Management Body of Knowledge) 3rd edition, A project is
defined as a temporary endeavor with a beginning and an end and it must be used to create a
unique product, service or result. Further, it is progressively elaborated. What this definition of a
project means is that projects are those activities that cannot go on indefinitely and must have a
defined purpose.
A project is an activity to meet the creation of a unique product or service and thus
activities that are undertaken to accomplish routine activities cannot be considered
projects. For instance, if your project is less than three months old and has fewer than 20
people working on it, you may not be working in what is called a project according to the
definition of the term.
It has to be remembered that the term temporary does not apply to the result or service that is
generated by the project. The project may be finite but not the result. For instance, a project to
build a monument would be of fixed duration whereas the result that is the monument may be
for an indefinite period in time.
A project is an activity to create something unique. Of course, many of the office buildings that
are built are similar in many respects but each individual facility is unique in its own way.

Finally, a project must be progressively elaborated. This means that the project progresses in steps and
continues by increments. This also means that the definition of the project is refined at each step and ultimately
the purpose of the progress is enunciated. This means that a project is first defined initially and then as the
project progresses, the definition is revisited and more clarity is added to the scope of the project as well as the
underlying assumptions about the project.

What are the basic phases of a project and their purposes ?

The phases of a project make up the project life cycle. It is convenient for the project managers to divide the
project into phases for control and tracking purposes. Each milestone at each stage is then elaborated and
tracked for completion. The basic phases of a project are dependent on the kind of project that is being carried
out. For instance, a software project may have requirement, design, build, test, implementation phases
whereas a project to build a metro or a building may have different names for each phase.
Thus, the naming of the phases of a project depends on the kind of deliverables that is sought at each phase.
For the purpose of definition, the phases may be divided into initial charter, scope statement, plan, baseline,
progress, acceptance, approval and handover. This classification is according to the PMBOK. Thus, the phases
of a project are closely correlated with that of the project cycle.
The purpose of each phase of the project is a set of deliverables that are agreed upon before the project starts.
For instance, in a software project, the requirement phase needs to generate the requirement documents, the
design phase the design document etc. The build phase in a project delivers the completed code whereas the
test phase is about the completed testing for the deliverables.
Each phase of the project is associated with a certain milestone and the set of deliverables that each phase is
expected to deliver is then tracked for compliance and closure. The Project Life Cycle consists of the initiating,
executing, controlling and closing processes of the framework as described in the PMBOK. Each of these
processes is necessary to ensure that the project stays on track and is completed according to the
specifications.
A project in any organization is collaboration across departments to achieve a single well defined objective. The
process of planning, organizing and managing resources to achieve the organizational objective is called
project management.
Project management is very important in production of goods and services. Idea generation to final production
of product or service, each step can be categorized as individual projects. Any project requires a project
manager, who leads the project to its logical conclusion. Project manager is responsible for appointing team
members with different background but essential in completion of the project.

Project Characteristics
A project is not normal day to day activity undertaken by organization rather it is specific, non-routine activity of
varying time frame and impact viability of the business in the long run. A typical project has following
characteristics:

Timeline: A project has a definite timeline with measurable starting and end point.
Resources: A project has limited resource of capital and manpower.

Tools: Special type of tools and techniques are used for project management (Gantt Charts, etc.)

Team: Project management requires diverse team stretching across departments and functions.

Project Life Cycle

A typical project is divided into following phases. Each phase of the project has its own importance and impact
on overall success of the project.

Initiation Phase: In this phase of the project, feedback received from customers is analyzed and
brainstorming is done as to develop new product or modify existing product to meet the new demands.
Project Definition Phase: In this phase of the project efforts are made to define the solution for the
problem posed by customers.

Feasibility Study: In this phase, planning of the project is made and definite milestones are
established.

Project Execution: In this phase all activities and milestones established in the earlier phase are
executed in a timely and orderly manner. This phase utilizes maximum of all resources.

Project Conclusion: This is the last phase of the project. In this phase, final product or service is
handed over to the operations team for commercial production.

Project Management Activities

Project management activities are mainly divided into three main categories Planning, Scheduling and
Controlling.

1. Planning: Planning activities include defining project objective, resource planning, etc.
2. Scheduling: Scheduling activities include developing detailed milestones and guidelines for the
project. These activities are performed typically before actual initiation of the project.

3. Controlling: Controlling activities include developing budget and finance control points, measuring of
scheduled tasks are performed.

Project Management Techniques

There are several techniques utilized for project management. Some of the techniques are as follows, and they
are mainly used for project scheduling.

Gantt Charts: These charts are used to depict the project tasks against time. It monitors progress of
individual project tasks and also highlights dependency if any between those project tasks.
Network Planning Techniques: These techniques show the relationship between project activities,
project duration, critical path, constraints of non-critical activities and resource utilization. There are
two types of network planning techniques Critical Path Method (CPM) and Program Evaluation and
Review Technique (PERT).

Rational Approach to Project Management in Organizations

The evolution of organization theories from mechanistic to people based ones has influenced the approaches
taken by managers in organizations towards the firm as well as organizing people. While the earlier decades of
the 20th century witnessed the rise of the mechanistic of the rational approaches, since the 1970s and
particularly in the last decade of the 20th century, there has been a trend towards viewing organizations as
interdependent, complex and chaotic. This has led to the adoption of the systems approach of organizations
that embraces complexity and uncertainty. However, many managers continue to take the rational approach
which views people as building blocks and the organization as a machine leaving little scope for flexibility and
adaptability to changes in the external environment (Baecker, 2006, 80). This article considers the reasons for
doing so and takes the position that managers would be better served to adopt the systems approach to deal
with the challenges of the 21st century.
The rational approach to organizations is appealing to most managers because of the comfort factor in
such an approach. It is common for managers to avoid complexity and ambiguity in their working
environment and hence taking an approach that has been described as being purposeful which
enables managers to work towards specific goals as the preferred alternative.

Further, the development of organizations in the 20th century has been such that many firms have tight
structures with clearly defined hierarchies, command and control bureaucracies. This enables managers to
take an approach that is mechanistic in nature and which thrives on formalization and standardization (Scott &
Davis, 2007, 30). Since this kind of organization structure was the norm across industries and sectors, many
managers of the old school of management pioneered by Taylor, Weber and others preferred a rational
approach which eschews uncertainty and embraces predictability (Beardwell, 2010, 76).
To consider examples of organizations that follow these rational approach in the real world and from a time
span of the latter decades of the 20th century to the present, we find that the main difference in the way
organizations approach HRM depends on the sector in which they operate and the period in time when they
started their operations. To take specific examples, the cases of GM (General Motors) and the United States
Government along with the NHS (National Health Service) in the United Kingdom are instances of
organizations that practice rational approaches to HRM and this is mainly due to the fact that these
organizations have a well defined structure and are tightly coupled with clear boundaries with the environment
in which they operate. Hence, these organizations can be said to be practicing a rational approach to HRM that
ties in well with their organizational mission and vision (Van De Van, 2006, 75).
The rational approach is particularly preferred by managers where there is top down decision making and the
strategic apex plans the strategies, directs the execution and monitors the implementation. In these
organizational structures, strategy is not emergent but rather planned consciously and elaborated in a step
wise manner.
The organizations that have fixed structures and are machine like in their approach to people and processes
are places where managers prefer the rational approach to organizations and organizing. Though this
approach is now fading away because of the new emergence of organizational forms and where the interaction
of the organization and the external environment is characterized by fluidity and uncertainty, there are still many
managers who prefer this approach due to the hangover of the old school of thought (Boxall & Purcell, 2003,
91).
It must be mentioned that this rational or mechanistic approach served the managers of yesteryears well and
the emphasis on the technical aspects of management like measuring the deliverables in clearly defined
terms i.e. output of the machine, plant utilization, efficiency and productivity measured in mechanistic terms all
contributed to the success of this approach which continues to deliver even to this day though emerging
sectors like the IT (Information Technology) sector and the financial services sector have pioneered the open
systems approach (Stern and Barley, 2006, 153).

Importance of Project Management for Organizations

Project management is the art of managing the project and its deliverables with a view to produce finished
products or service. There are many ways in which a project can be carried out and the way in which it is
executed is project management.
Project management includes: identifying requirements, establishing clear and achievable objectives,
balancing the competing demands from the different stakeholders and ensuring that a commonality of
purpose is achieved. It is clear that unless there is a structured and scientific approach to the practice of
management, organizations would find themselves adrift in the Ocean called organizational development and
hence would be unable to meet the myriad challenges that the modern era throws at them. Hence, the
importance of project management to organizations cannot be emphasized more and the succeeding
paragraphs provide some reasons why organizations must take the practice of project management seriously.
Without a scientific approach to the task of managing the projects and achieving objectives, it would be very
difficult for the organizations to successfully execute the projects within the constraints of time, scope and
quality and deliver the required result. In other words, there has to be a framework and a defined way of doing
things to ensure that there is a structure to the art of project management.

Thus, project management is about creating structure and managing the project commitments and the delivery
of agreed upon results. By using the methods of project management as described in the PMBOK and allied
technical journals, organizations can seek to achieve control over the project environment and ensure that the
project deliverables are being managed. Managers face what is known as the triple constraint. This is the
competing demands of time, scope and quality upon the project managers list of things to do and how well the
project manager manages these constraints goes a long way in determining the success of the project. Without
the use of Project Management, managers and organizations would find themselves facing an unpredictable
and chaotic environment over which they have little control. Thus, Project Management is both necessary and
essential to the success of the project.
Project Management is too big an area to be covered in a few pages and the attempt is to provide concise and
lucid definitions of the various terms and terminologies associated with a project. It is important to note that
project management provides a framework within which subsequent actions by the organization can be taken
and in this way, it is essential for organizations to adopt the framework provided by the practice of project
management.

Conclusion
In conclusion, Project Management and the practice of the same have become indispensable to the modern
day project manager and they form the basis of much of what is achieved during the course of a project. Thus,
the idea of a project being managed professionally lends itself to the concepts and processes laid out for the
practitioners of the art of Project Management.

Team Management during a Project

Team Member Selection
Team member selection is a process that involves mapping of skills and strengths of each individual member
with that of the role and the job description for which they are being hired or taken into the team. The process
should take into account the perceptions of the team member regarding the role for him or her and ensure that
it is in line with the expectations from them. Only this would ensure a right fit between the individual members
and the role for which they are being taken. Further, team selection should not be an ad hoc process and
should involve commitment and patience from the project team. The manager has to give enough thought to
the selection criterion and how they must be applied to the selection of team members.

Team-Building Strategies
Team building is a never ending process though more attention must be given to the task early on in the project
lifecycle. The effective team building strategies call for increased co-operation and understanding between the
team members. The objective must to be foster a spirit of mutual reinforcement in the tasks that they perform
and that which they accomplish.
The verbal as well as the non-verbal communication must be encouraged and built up with a view to get the
team to bond together. Effective team building also requires the team members to trust each other implicitly
and explicitly. This involves a process of building rapport and cueing from each other with regards to doing the
tasks together and achieve greater co-operation and build good will among the team.

Conflict Management in Diverse Teams

The following can be taken as potential sources of conflict within a diverse team:
Groups working on the project may have different goals and expectations. In this case the bottom line
expectations for the project must be laid down and the project manager must ensure that the team members
stick to the expectations of the project and learn to subordinate individual goals and aspirations to that of the
team goals. Some conflicts reflect the fact that the day-to-day work on projects is usually carried out by many

different units of the organization, units that often differ in their objectives and technical judgments. The result is
that these units have different expectations about the project, its costs and rewards, its relative importance, and
its timing.
There is considerable uncertainty about who has the authority to make decisions. There is nothing like a
vacuum to create conflict and hence the project manager must be empowered to take decisions and he or she
must be the deciding authority for the project. Uncertainty about who has the authority to make decisions on
resource allocation, on administrative procedures, on communication, on technological choices, and on all the
other matters affecting the project produces conflict between the PM and the other parties. Conflicts about
schedules, intra and inter-project priorities, cost estimates, and staff time tend to fall into this category.
There are interpersonal conflicts between people who are parties-at-interest in the project. This is the
most common cause of conflict and effective steps must be taken to ensure that team spirit remains intact and
the morale of the team members remains high. The minimum requirement is that team members learn to work
with each other and for the common project objectives.

Costs in Project Management - Costs associated with the Projects

Costs
The following are the costs associated with the projects.
1.

Direct cost
Any cost that are directly attributable to the work on the project. These can include the salaries paid to
the resources, the billing rate of the resources and costs of the software and hardware that are used
for building the website

2.

Indirect Cost
These costs are spread out against many projects and cannot be linked to one project alone. These
costs include those incurred in shared services like cost of office space, taxes paid by the organization
and other services like secretarial and janitorial staff

3.

Variable Cost
Costs that change in proportion to the amount of time and material that are spent on produced in the
project.

4.

Fixed Cost
Cost that do not change with the timeline or progress of the project.

A cost be either Fixed or Variable; Direct or Indirect

The overhead costs for this project are the office setup and shared services. While the costs incurred in setting
up the office space can be general overhead cost as it is a one-time cost and is borne by all the projects in the
organization.
The project overhead costs are the costs incurred in the shared services such as secretarial staff and other
services provide to the project and can be directly billable as such.

Time phased budget

A time phased budget would include the costs incurred at each interval or milestone of the
project. The milestones for this project would be requirements, design, coding, testing and
implementation. The budget for the same would be the costs at each stage of the project.
The budget at completion or BAC should have all the components of the costs included like
direct and indirect costs, fixed and variable costs etc along with the cost at each phase or
milestone of the project. The cost variance should be measured using Earned Value technique
and this tool allows the manager to assess the completion of the project at each milestone
according to the cost incurred and the value accrued till then. Variance between these two
measures gives an accurate estimate of the health of the project.
Cumulative costs
The cumulative costs of the project are the ones that are incurred up to a specific phase or
milestone of the project. It can be measured by using a Cost Performance Index or CPI which
measures the ratio of the Earned value with regards to the Actual cost incurred on the project.
As outlined above, all the costs that accumulate up to a particular phase can be called the
cumulative costs of the project.
Cost control
The cost management plan should include the plan for controlling the costs of the project. There
should be a measurement of the costs involved and their variances tracked, if any. Any variance
to the budget must be controlled by the controlling the impact of the cost changes.
Further, cost control can be done in the area of overhead costs and general and administrative
expenses.

Components of a Project Plan

Introduction
This article details the high level project plan and the components of the same. A project is a success if it meets
the objectives of time, cost, technical and business. Project objectives are defined in the preliminary project
scope statement. As mentioned above, a project is deemed complete if the project objectives have been met.
The objectives should be clear and achievable.

Project Objectives
The objectives for this project have been summarized as:
1.

Time
The project plan must contain the time taken to complete the project end-end from requirements to
implementation. A detailed analysis of each stage and the time taken for the same must be outlined
upfront and milestones for each stage defined.

2.

Cost

The cost for completion of the project as defined by the time taken to complete and the technical and
business objectives being met is to be defined. All the project objectives are linked to each other and
any change in one variable affects the others as well. For e.g. a change in the technical requirements
would mean that more time would be required to complete the project and this in turn affects the cost.
Thus there are cascading affects on each of the variables.
3.

Business
The business objectives have to be clearly spelt out by your company in terms of the sales generated,
the cost benefit analysis of building a website and consequent revenue generation etc.

4.

Technical
The technical requirements can be stated in terms of the quality of the deliverables and the number of
defects found during each of the testing phases and the turnaround time for implementation etc.

The above chart is a representation of the Work Breakdown Structure (WBS) for the project. It represents a
high to medium level summary and it can be refined further. The WBS has been summarized in the
organization chart keeping in mind some factors like:

The WBS is a high level overview that can be broken down into smaller and smaller package of work
until the Project Manager achieves the level of granularity that he/she wants. This granularity is to be
obtained keeping in mind the realistic scenarios. For e.g. the first level of the WBS described above is
the same as the project life cycle, Requirements, Design etc.
The next levels of the WBS are broken down based on the work packages that are to be assigned to
the team members. The packages must be designed in such a way that the deliverables are met.

In a way, the WBS is the foundation of the project. The time and cost of the project are defined in
terms of the work packages and estimated accordingly.

Responsibility Matrix
Team Member
Activity
Team member 1

A (design)

B (coding)

C (testing)

Team member 2

Team member 3

P - Primary responsibility
S - Secondary responsibility
This chart cross references the WBS created for the project. Each of the work packages created in the WBS is
allocated to each of the team members with primary and secondary responsibilities assigned accordingly.

Project Plan
The project plan consists of the above details as well as the WBS and the responsibility matrix. A detailed
project plan needs more elaboration and is a separate activity altogether.