Decision Making & Organizational Structure: Key Concepts

Posted on Feb 23, 2025 in Public Administration, Management, and Governance

Organizing for Decision Making

Organizing for decision making: The nature of organizing, organization levels and span of control in management. Organizational design and structure, departmentation, line and staff concepts. Limitations of decision making, evaluation and selecting from alternatives. Programmed and non-programmed decisions. Decision under certainty, uncertainty, and risk. Creative process and innovation.

Nature of Organizing

• The term “Organizing” means systematic arrangement of activities.
• In management, it represents all those activities that result in the formal assignment of tasks, authority & responsibility to groups and individuals.
• Organizing becomes necessary when two or more persons work together to achieve some common objectives.

Organization Levels

• There are generally three levels of management within an organization including top-level, middle-level, and first/low level that are arranged in numbers with:
• More first-level managers
• Smaller amount of middle managers
• Fewer top-level managers

The number of people (and departments) that report directly to a particular manager. Once work is divided, the span of control is chosen, and departments are created.

Span of Management

Narrow Span of Management

A single manager or supervisor oversees few subordinates. This creates a tall organizational structure.

Narrow Span Advantages

• Within a tall organizational structure, there is close supervisory control because of the low span of managers.
• This structure enhances the controllability of the top levels.

Narrow Span Disadvantages

• Employees are less motivated within this structure.
• Tall structures create communication barriers between the upper and lower management.
• Managers are underutilized.

Wide Span of Management

This means a single manager or supervisor oversees a large number of subordinates. This gives rise to a flat organizational structure with fewer management levels between top and bottom.

Wide Span Advantages

• Flat organization is less costly.
• Communication will be fast and clear.
• Employees are motivated, as they are free from close and strict supervision and control.

Wide Span Disadvantages

• There are chances for weaker controls.
• Chances of poor relation between the superior and subordinate.

Factors Affecting Selection of Span of Control

A span of control should neither be too wide nor too narrow.

• Organizational size: Large organizations tend to have a narrow span of control, whereas smaller organizations often have a wider span of control. This difference is usually due to the costs involved with more managers.
• Workforce skill level: Efficient and trained subordinates can be in a wider span.
• Nature of Work: Routine tasks allow a wider span; complex or dynamic works are suited for a narrow span.
• Organizational culture: Flexible workplaces can have a wider span of control because employees are given more autonomy and flexibility in the production of their work.
• Time required to be spent on Supervision
• Requirement of speed of communication: Narrow enhances the speed of planning & decision making.

Organization Design

• The creation of roles, processes, and structures to ensure that the organization’s goals can be realized.
• Organizational designers define the reporting lines.
• By design, we get the integration of people with core business processes, technology, and systems.

Organizational Structure

An organizational structure defines how activities such as task allocation, coordination, and supervision are directed toward the achievement of organizational aims.

Line Authority

• Line authority represents superior-subordinate relationships for particular functions.
• Line managers have total authority over those who report directly to them.

Staff Authority

• These are support positions providing services, advice, assistance, and support to the line authority to enable them to perform their duties.
• It is for the line managers to decide whether to take some decision with respect to the given advice.

Merits of Line and Staff Organization

• Relief to line executives: The line executive can concentrate on the execution of plans and they get relieved of dividing their attention to many areas.
• Expert advice: The line and staff organization facilitates expert advice to the line executive at the time of need.
• Benefit of Specialization: Every officer or official can concentrate in its own area.
• Benefits of Research and Development: This is possible due to the presence of staff specialists.
• Training: Due to the presence of staff specialists and their expert advice serves as ground for training to line officials.
• Balanced decisions: This relationship automatically ends up the line official to take better and balanced decision.
• Unity of action: Unity of action is a result of unified control and serves as effective control in the whole enterprise.

Departmentation

• A department is a distinct area or a branch of the organization which handles tasks of a similar nature.
• The process of grouping of activities into units for the purpose of administration is called departmentation.

Description of the functions of a particular department, fixing the authority and responsibility to heads and staffs who have specialized in respective fields.

• It increases the operating efficiency of the employees.
• It makes the employees to be efficient in their duties.
• It makes the departmental heads efficient.
• It gives advantages like facilitating budget preparation, effective control of expenditure, attaining specialization, better coordination, etc.

Limitations of Decision Making

• Bounded rationality/wisdom: imperfect information about goals and courses of action.
• Imperfect knowledge
• Limited time and resources
• Environmental dynamics
• Bounded discretion/choices: constraints on optimizing, prior commitments, moral and ethical standards, laws and social standards.
• Forced to make decisions that are just good enough, are called Satisficing.
• This is because aiming for the optimal solution may necessitate needless expenditure of time, energy, and resources.

Evaluating Alternatives

Once appropriate alternatives have been developed, the next step in decision making is to evaluate them and select the one that will best contribute to the goal. Decision criteria can include:

• Cost-Effectiveness analysis: Seeks the best ratio of benefit for a given cost.
• Timeliness
• Feasibility/Whether the decision will work

Decision Making Under Certainty, Uncertainty, and Risk

Decision Making Under Certainty

• Decision maker has a clear idea about the outcomes.
• Under conditions of certainty, accurate, measurable, and reliable information on which to base decisions is available.
• The cause and effect relationships are known and the future is highly predictable under conditions of certainty.
• Such conditions exist in the case of routine and repetitive decisions concerning the day-to-day operations of the business.

Decision Making Under Uncertainty

• The decision maker can in no way assess the probabilities of various states of nature.
• Most significant decisions made in today’s complex environment are formulated under a state of uncertainty.
• The decision-maker is not aware of all available alternatives, the risks associated with each, and the consequences of each alternative or their probabilities.
• They have to depend upon their judgment and experience for making decisions.

Decision Making Under Risk

• The decision maker chooses to consider several possible outcomes and the probabilities of occurrence can be stated.
• Under a state of risk, the decision maker has incomplete information about available alternatives but has a good idea of the probability of outcomes for each alternative.