Tag: Decision-Making Processes

Decision-making is a leadership skill that managers use to assess a situation and determine how the organization may proceed. The decision-making process involves the following steps:

• Identifying the challenge: In this step, the manager discovers an issue and determines the circumstances that led to the situation.
• Devising solutions: After learning more information about the case, the manager creates one or several possible solutions.
• Weighing options: The manager analyzes the advantages and disadvantages of each option and explores alternative solutions if needed.
• Making a choice: Once a thorough assessment takes place, the manager makes a final decision about what action to take.
• Informing others of the decision: The manager informs employees of the decision and explains how the decision influences the workplace.

Role:

Improve workplace productivity

Effective decisions can save time and propel work projects forward, increasing employee productivity. For example, employees at a small furniture store disagree about when to host the annual spring sale, which prevents them from promoting the sale and preparing the store for an influx of customers. The manager of the store announces the sale date in April. This decision starts the planning process and motivates employees to complete their associated occupational tasks.

Reduce conflict

The decision-making process can decrease conflict by setting clear expectations for employees, leaving little room for misunderstandings. As a manager, you can provide direction on how your team collaborates to achieve organizational goals. For example, you may assign teams for major projects to distribute the work evenly. Deciding what standards you want for your team can promote shared understandings instead of confusion.

Establish trust with the employees

Good decision-making can help managers show their employees that they value their work and have their best interests in mind. When a manager takes the time to evaluate, analyze and explain decisions, they also display thoughtfulness and trustworthiness. Employees may feel they can confide in their managers about their interests and concerns.

Create action plans in emergency situations

Emergency situations may require managers to make quick, impactful decisions to minimize damage and optimize benefits. For example, a small town experiences a power outage, and employees at a local grocery store become concerned with how this may affect their work hours.

The store manager decides to open the store operating on a generator and provide work hours for employees who can safely travel to the store. This ensures employees can work to earn income and the store receives business. When unexpected situations occur, it’s important for managers to assess organizational needs and decide how best to proceed.

People

You spend a lot of your waking hours at work, so it’s beneficial if they’re enjoyable hours, but that’s not always the case. The people within an organization are one of the primary influences over the overall organizational behavior within a company. The interactions between individual employees is, in fact, one of the main areas of study within the field of organizational behavior. Various personal characteristics that may influence organizational behavior include the education level of employees, their backgrounds, abilities and beliefs.

Personal factors:

The personal factors that can influence the behavior of an individual is further categorized into 2 parts that includes Biographic and learned characteristics.

Biographic Characteristics:

Every human being have certain type of characteristics which are inherited and genetic in nature. These characteristics cannot get changed. In an organization, if the manger will come to know about the limitations and qualities each personal possess, then they can easily make use of their behavior techniques of an organization in an effective manner. These characteristics include:

(i) Physical Characteristics: It mainly consists of skin, vision, height, complexion and many more. It creates impact on the performance of the individuals. Also, certain features include tall, fat or slim. A person with good personality is always expected to dress and behave well in an organization, even if there is any correlation between the behavior and body structure or not.

1. Age: It is the inherited characteristic of an individual. In increasing performance, it is considered as an issue. Young people are expected to behave more energetic, adventurous, innovative, risk taking and ambitious. With the advancement in age, performance of a person is more likely to decline.
2. Gender: It is a genetical feature. This concept has initiated lots of discussion, debates and opinions. It is a traditional view that women are more emotional. A small difference between men and women can affect their job performance. Without any male-female differences, some of the people have competitive drive, leadership, motivation, learning ability, analytical skills or problem solving ability. A study have been conducted which says that the female employees generate more turnover rates. This is because there are more chances of females to quit their job for their personal reasons.
3. Religion: In determining some of the aspects of individual behavior, religion and its related cultures plays a significant role especially that have the basic concern with ethics, morals and code of conduct. It also helps in identifying the attitude of an individual towards their work and financial management incentives. But nobody can deny from the fact that people who are highly religious have more moral values than others.
4. Marital Status: A recent research says that the responsibilities of the person inclined with their marital status and it has become difficult to s6table in a particular job for the longer period of time. Employees that are married have fewer absences, more job satisfaction and fewer turnovers.
5. Experience: The tenure or the experience of an employee plays a significant role within the organization. It creates lot of speculations and misconceptions due to the seniority factor. Also, work experience is considered as a good indicator that helps in increasing productivity with greater efficiency and effectiveness. There is a positive relationship between the job performance and the seniority. The turnover of an employee is also considered as negative in relation to the seniority.
6. Learned Characteristics:

Learning is defined as a permanent change in the behavior of an employee that results in the interactions with the environment. The biographical features of a person are impossible to modify. Therefore, the managers of the organization paid a great interest in learning, studying and predicting the learned characteristics that include:

(1) Personality: Personality does not only lie with the physical appearance of the person. A person with a good personality comprised of smart person, smiling face and charming personality. This concept is considered as dynamic that describes the growth and development of the psychological system of the person. It is also refereed as personal traits or characteristics that include persistence, dominance, aggressiveness and other qualities that is reflected through the behavior of the person within the organization.

(2) Perception: It is the viewpoint that helps in the interpretation of some situation. Also, it is considered as the process which allows the information to enter in the minds and allowed to obtain sensible meaning for the whole world.

(3) Values: Values are considered as the global belief that instructs different judgments and actions across various situations. It consists of an individual’s idea based on the right, good and desirable opinions. It is closely embedded in the people who could be reflected through their behavior. Also, most of time values are directly influenced from the teachers, parents, friends and various other external factors that completely changed the ideas, opinions and thoughts of the person. For an organizational behavior, values are very significant. It helps in understanding the motivation and the attitude of an individual along with the influences of their perceptions or view point.

Company Structure

The structure of a company refers to the organization of individuals in various roles and the relationships, both formal and informal, between those roles. For example, some companies have rigid hierarchies that define the relationship between managers and employees, while others have more collaborative, egalitarian systems in place. The number of levels in an organization also influences the company’s organizational behavior. For example, in a company with many levels between entry-level employees and top management, entry-level employees may feel they have less of a stake in their organization or that their opinions are valued less than in a company in which there are relatively few levels between top and bottom.

Technology

The use of technology is an often-overlooked component of organizational behavior. For example, employees within a company may exhibit the organizational behavior of communicating primarily via email, while employees in another company may make it a habit to walk down the hall to others’ offices to speak face-to-face. Technology also affects organizational behavior in that it allows companies to increasingly allow employees to work from home, resulting in less bonding among employees. At the same time, the use of technology can bring together people separated geographically through the use of teleconferencing, for example.

Environment

The environmental influences on organizational behavior can come from both internal and external sources. A company engaged in a highly regulated business may have a strict and structured culture due to the need to conform to certain laws and regulations from the company’s external environment. The internal environment of a company also affects organizational behavior. For example, a struggling company will often have a different organizational behavior than a successful and growing business. When a company’s higher ups set an example in order to improve organizational behavior, the effects trickle down to lighten the mood from one level to the next which is as good for morale as it is for business.

Economic Factors:

In an economic environment, the behavior of an individual is largely affected due to certain factors including:

(a) Employment Level: The employment opportunities available to an individual directly influence the behavior of an individual. Even after the lack of job satisfaction, the individual has to stick to the same job as there are less job opportunities for him/her. In such cases, it is important that they may be loyal to the company in providing better productivity; they are only remaining in the same organization due to the monetary benefits offered to them.

(b) Wage Rates: Every employee is majorly concern with the wages offered to them by the company or the organization. The decision of a worker or an employee is directly affected by the monetary terms from the side of the company.

(c) General Economic Environment: There are various employees that does not have any effect of economic cycle whether in a public sector undertakings or government offices. Regardless of their economic position within the organization, they will receive their salaries. Employees in the private sectors are greatly affected by the stable income and job security but the former employees can be motivated from other factors.

Similarly, there are various other environmental factors in an organization that could affect the behavior of the employees, including social factors, political factors or legal environment.

Organizational Factors: With wide variety of resources and organizational systems, individual behavior is influenced that includes:

Physical Facilities:

At a workplace, the physical environment is considered as an arrangement of people and things positive that could also create influence on other people. There are certain factors that influence the behavior of an individual including cleanliness, light, ventilation, noise level, nature of job, number of people working, etc.

(a) Structure and Design: The way in which every department of the organization is set-up has direct concern with the structure and design. The performance and the behavior of an individual is directly influenced by the position at which person could perfectly fits in the whole organizational hierarchy.

(b) Leadership: The management of the organization establish the system of leadership so that the proper assistance, advice, guidance, direction and coaching could be given to the individuals. The behavior of each employee is influenced to the large extent to the behavior of the leaders or the superiors of the same organization. The behavior of the leaders is more important than the qualities of the leaders.

(c) Reward System: The performance and the behavior of individuals are directly influenced by the reward system that is established by the organization so that the employees could be able to compensate.

Participative decision-making (PDM) is the extent to which employers allow or encourage employees to share or participate in organizational decision-making. According to Cotton et al., the format of PDM could be formal or informal. In addition, the degree of participation could range from zero to 100% in different participative management (PM) stages.

PDM is one of many ways in which an organization can make decisions. The leader must think of the best possible way that will allow the organization to achieve the best results. According to Abraham Maslow, workers need to feel a sense of belonging to an organization (see Maslow’s hierarchy of needs).

Styles:

Democratic Leadership. This is the type of leadership style in which members are encouraged to share their ideas and then synthesizes the available information into the best possible decision. Researchers have found that this style is usually the most effective and leads to better contributions from the group, as it produces a work environment that employees can feel good about because they know their opinion counts and they can bring a real difference to the organization.

Autocratic Style. Here, the leader takes the employees’ opinions, collects them and facilitates the conversation, but takes control and responsibility of the final decision. This is most effective during crises and emergencies where decisions have to be made quickly.

Consensus. In the consensus participative decision-making style, the leader gives up complete control of the decision and leaves it to the members of the group to conclude the majority decision. Doing this requires teamwork, trust, and communication (and time, because it takes a while) but it usually brings out the best decisions since it is well thought out. Consensus style improves goal-setting, problem-solving, and team-building among groups.

Delegated by Expertise. Of course, not everyone is an expert at everything. Everyone has their area of expertise. Here, the leader delegates the responsibility to the expert of their area of concern so they can arrive at the best outcome. This style of decision-making process can help the group feel more creative and engaged in the process.

Choosing the right style for your organization shouldn’t be a one-off. As HR practitioners, we always have to be mindful of the dynamics in our organization so we can decide on the right participative decision-making style (depending on the situation) that will improve our employee engagement and ensure that everyone in the company feels valued and respected.

Advantages

PM is important where a large number of stakeholders are involved from different walks of life, coming together to make a decision which may benefit everyone. Some examples are decisions for the environment, health care, anti-animal cruelty and other similar situations. In this case, everyone can be involved, from experts, NGOs, government agencies, to volunteers and members of public.

However, organizations may benefit from the perceived motivational influences of employees. When employees participate in the decision-making process, they may improve understanding and perceptions among colleagues and superiors, and enhance personnel value in the organization.

Participatory decision-making by the top management team can ensure the completeness of decision-making and may increase team member commitment to final decisions. In a participative decision-making process each team member has an opportunity to share their perspectives, voice their ideas and tap their skills to improve team effectiveness and efficiency.

Participatory decision-making can have a wide array of organizational benefits. Researchers have found that PDM may positively impact the following:

• Job satisfaction
• Organizational commitment
• Perceived organizational support
• Organizational citizenship behavior
• Labor-management relations
• Job performance and organizational performance
• Organizational profits

Outcomes

The outcomes are various in PDM. In the aspect of employees, PDM refers to job satisfaction and performance, which are usually recognized as commitment and productivity[9] In the aspect of employers, PDM is evolved into decision quality and efficiency that influenced by multiple and differential mixed layers in terms of information access, level of participation, processes and dimensions in PDM.

Research primarily focuses on the work satisfaction and performance of employees in PDM. Different measurement systems were applied to identify the two items and the relevant properties. If they are measured with different processes in PDM, the relationship is as described below:

• Identifying problems: Do not have strong relationship with performance. Because even with full participation, participants may not explore their skills and knowledge in identifying problems, which is likely to weaken the desires and motivation then influence performance.
• Providing solutions: Positive and “potentially strong” relations with performance. It is not only attributed to the skills and knowledge could be explored but also the innovative ways employees can provide and generate.
• Selecting solutions: Positive to performance but not likely to enhance satisfaction. If the solutions generated are not acknowledged by the employees who are absent at the previous stage, the satisfaction could lessen.
• Planning implementation: Positive and strong relationship with both performance and satisfaction. Participants are given the possibility to affect the achievement of a designed plan. As the “value attainment” is attached, the extent of performance and work satisfaction increase.
• Evaluating results: Weaker relationship with performance, but positive relationship with satisfaction due to the future benefit.

There are a number of ways through which employees can participate in decision-making process of any organization.

• Participation at the Board Level: Representation of employees at the board level is known as industrial democracy. This can play an important role in protecting the interests of employees. The representative can put all the problems and issues of the employees in front of management and guide the board members to invest in employee benefit schemes.
• Participation through Ownership: The other way of ensuring workers’ participation in organizational decision making is making them shareholders of the company. Inducing them to buy equity shares, advancing loans, giving financial assistance to enable them to buy equity shares are some of the ways to keep them involved in decision-making.
• Participation through Collective Bargaining: This refers to the participation of workers through collective agreements and by deciding and following certain rules and regulations. This is considered as an ideal way to ensure employee participation in managerial processes. It should be well controlled otherwise each party tries to take an advantage of the other.
• Participation through Suggestion Schemes: Encouraging your employees to come up with unique ideas can work wonders especially on matters such as cost cutting, waste management, safety measures, reward system, etc. Developing a full-fledged procedure can add value to the organizational functions and create a healthy environment and work culture. For instance, Satyam is known to have introduced an amazing country-wide suggestion scheme, the Idea Junction. It receives over 5,000 ideas per year from its employees and company accepts almost one-fifth of them.
• Participation through Complete Control: This is called the system of self management where workers union acts as management. Through elected boards, they acquire full control of the management. In this style, workers directly deal with all aspects of management or industrial issues through their representatives.
• Participation through Job Enrichment: Expanding the job content and adding additional motivators and rewards to the existing job profile is a fine way to keep workers involved in managerial decision-making. Job enrichment offers freedom to employees to exploit their wisdom and use their judgment while handling day-to-day business problems.
• Participation through Quality Circles: A quality circle is a group of five to ten people who are experts in a particular work area. They meet regularly to identify, analyze and solve the problems arising in their area of operation. Anyone, from the organization, who is an expert of that particular field, can become its member. It is an ideal way to identify the problem areas and work upon them to improve working conditions of the organization.

Motivational research is a kind of marketing research that tries to explain why customers behave as they do. Indirectly, motivational research assumes the presence of underlying or unconscious reasons that influence consumer behaviour.

Motivation research is a form of consumer research which has gained ground over the recent years. Motivation Research is the currently popular term used to describe the application of psychiatric and psychological techniques to obtain a better understanding of why people respond as they do to products, ads and various other marketing situations.

Motivational research tries to identify forces and influences that customers may not be aware of (e.g. cultural factors, sociological forces). Naturally, these unconscious motives (or beyond awareness reasons) are intertwined with and complicated by conscious motives, economic variables, cultural biases, and fashion trends (broadly defined).

Motivational research tries to examine through these influences and factors to undo the mystery of consumer behaviour as it relates to a specific product or service, so that the marketer well understands the target audience and how to influence that audience.

Techniques of Motivation Research:

The techniques used in motivation research are of two types namely, Projective Techniques and Depth Interviews.

Projective Techniques:

These projective techniques represent the test conducted to establish the personalities of the respondents and their reactions to product media advertisement package product design and the like.

They project or reflect the subject’s thought about what he or she sees, feels, perceives thus producing the reactions.

These tests are derived from clinical psychology and work on the postulation that if an individual is placed in an ambiguous situation, he is guided by his own perceptions to describe the situation.

They often provide, an insight into the motives that lie below the level of consciousness and when the respondent is likely to rationalize his motives consciously or unconsciously; his responses tend to reflect his own attitudes and beliefs by indirection and discretion; they are his own perceptions and interpretations to the situation to which he is exposed.

There are five most commonly administered tests of this kind namely:

1. Thematic Appreciation Test.
2. Sentence Completion Test.
3. Word Association Test.
4. Paired Picture Test and
5. Third Person Test.

1. Thematic Appreciation Test (TAT):

Under this test, the respondent is presented with a picture or series of pictures of a scene or scenes involving people and objects associated with goods or services in questions. These are unstructured, doubtful in action and very often neutral giving no expression or motions. The respondent is to study the picture or the pictures and construct a story.

His narrations or readings are interpreted by a skilled analyst. Thus, the picture may be of a young man scribbling on a piece of a paper. Here, the respondent is to read as to whether the person in picture is writing. If so what? For whom? And why? And so on.

2. Sentence Completion Test (SCT):

Sentence completion tests are designed to discover emotional responses of the respondent. It is the easiest, most useful and reliable test to get the correct information in an indirect manner. The respondent is asked to complete the sentence given.

For instance, the questions may be, in case of ladies:

1. I like instant coffee because……………
2. I use talcum powder because…………..
3. I use electric kitchen gadgets because………………….
4. I do not use pain-killers like aspirin because……………..
5. I do not like red, brown and black colours because…………………….. In case of men, these questions may be

(a) I liked filter tipped cigarettes because………………….

(b) I gave up smoking because…………………

(c) I love natural proteins because………………..

(d) I prefer cold coffee because………………

(e) I do not use foam beds because……………….

The way the questions are asked, do not reflect right or wrong answers. However, the emotional values and tensions are reflected in the answers so given.

3. Word Association Test (WAT):

Word association test is similar to that of sentence completion test. The only difference is that instead of an incomplete sentence, a list of words ranging from twenty-five to seventy-five is given. This is the oldest and the simplest kind of test.

The respondent is to match the word. That is, the word suggested by the researcher is to be associated by the respondent by the most fitting word he thinks. This is widely used to measure the effect of the brand names and advertising messages.

Here, it is not possible to give all the seventy-five words. On illustrative basis, let us have fifteen words:

1. Perfume………..
2. Tooth paste
3. Hair oil………..
4. Shampoo……………………….
5. Shoes…………
6. Two-wheelers…………
7. Four-wheelers…………
8. Tyre………………………
9. Glass wares………….
10. Ink………..
11. Pencils…………
12. Fridges…………………….
13. Cupboards…………
14. Television………………….
15. Video cassettes………………

Thus, a respondent may give his preferences as ‘Colgate’ or ‘Promise’ or ‘Close-up’ or ‘Forhans’ in case of tooth paste. On the basis of such answers, it is possible to determine a scale of preference.

4. Paired Picture Test (PPT):

This is another very appealing and easy to administer test. Paired picture test means that the respondent is given a pair of pictures almost identical in all respects except in one. For instance, the researcher may be interested in knowing the reaction of respondents to a new brand of refrigerator.

The pair of pictures may show a woman opening refrigerator which is moderately priced with a usual brand; another picture of the same woman opening the refrigerator door of another brand.

Looking to these two pictures, the respondent is to give his own feelings or reactions. Though the same pair is shown to so many respondents, the reactions differ from person to person. Instead of using the usual figures, cartoons may be introduced. The analyst gets here the inner feelings of an individual for this analysis purpose.

5. Third Person Test (TPT):

The format of this test is that the respondent is given a photograph of a third person may be a friend, a colleague, a neighbour, a star, a player, a professional and the like The point involved is that the researcher is interested in knowing what the third person thinks of an issue as heard through the respondent.

It is assumed that the respondent’s answer will reveal his own inner feelings more clearly through the third person than otherwise it would have been possible.

The best example of this kind the test conducted on American house-wives in connection with ‘instant coffee’. Prior to the test, the attitude of house-wives was “It does not taste good”, with the test being conducted, the real attitude was “A lady using instant coffee is lazy, spend-thrift and not a good house­wife”. This amply clears the fact how the test revealed the naked truth.

In addition to these tests of usual type, the researchers do use other qualitative techniques such as role-playing, psycho-drama, graphology and the like.

Motivation Research Technique:

There are four techniques of conducting motivation research:

(a) Non-disguised Structured Techniques.

(b) Non-disguised, Non-structured Techniques.

(c) Disguised Non-structured Techniques.

(d) Disguised structured Techniques.

(a) Non-disguised Structured Techniques:

This approach employs a standardized questionnaire to collect data on beliefs, feelings, and attitude from the respondent.

Single Question Method:

(I think it is a good product or I think it is a poor product).

Multiple Questions Method:

(Numbers of questionnaires asked about the attitude) and Physiological Tests (laboratory tests such as galvanic skin response, eye movement etc. measure attitudes of people towards products) are carried out under this approval.

(b) Non-disguised, Non-structured Techniques:

These techniques use a non standardized questionnaire. The techniques are also called depth interview, qualitative interviews, unstructured interviews, or focussed interviews. All these techniques are designed to gather information on various aspects of human behaviour including the “why” component.

(c) Disguised, Non-structured Techniques:

In this approach, the purpose of study is not discussed to respondents unlike above two cases. A list of unstructured questions is used to collect data on consumer’s attitudes. This art of using disguised and unstructured method is referred to as “Projective Techniques”.

The projective techniques include several tests given to the respondents. They may be asked to give their comments on cartoons, pictures, stories etc. The stimuli used for this purpose are capable of answering the respondent to a variety of reactions. A number of Projective Techniques, are available to the market researchers for the purpose of analysing “why” part of consumer behaviour.

Qualitative Techniques:

(Projective Techniques and Word Association as follows).

The main Projective Techniques are:

1. Word Association Test (W.A.I):

The interviewer calls a series of listed words one by one and the respondents quickly replies the first word that enters his mind. The underlying assumption is that by “free associating” with certain stimuli (words) the responses are timed so that those answers which the respondent “response out” are identified.

2. Sentence Completion:

Sentence completion test is similar to word association test except that the respondent is required to complete an unfinished sentence.

For example, “I do not use shampoos because……..”

“Coffee that is quickly made…………. ”

3. Story Completion:

In this technique the respondent is asked to complete a story, end of which is missing. This enables a researcher to find out the almost exact version of images and feelings of people towards a company’s product. This helps in finalising the advertising and promotional themes for the product in question.

4. Research of Ink-blot Tests (or Research Tests):

Motivation Research employs this famous test. These tests are not in much use in marketing research. The research test expresses in a classic way the rationale behind all projective tests, that is, in filling the missing parts of a vague and incomplete stimulus, the respondent projects himself and his personality into the picture.

A lot of ink is put on the piece of paper and reference is made of company, product, and the respondent is asked to give his view points after interpreting what he sees in the blot before him. The respondent say, “ugly packaging of the product”, or “excellent performance of the product”. This response will help the seller to finalise his marketing strategies.

5. Psychographic Technique:

This includes galvanic skin response, eye movement and eye blink test etc. which uses various Instruments with the physiological responses.

6. Espionage Technique:

There are two methods in this technique:

(i) Use of Hidden Recorders:

Such as hidden tape recorders, cameras used to watch consumers as they make purchases or consume items.

(ii) Rubbish Research:

This is another method of espionage activity. Here, the researcher shifts through the garbage of individuals or groups and record pattern of consumption, waste, and brand preference. It gives most required estimates of consumption of cigarettes, medicines, liquor, and magazines etc.

(d) Disguised Structured Techniques:

When we are to measure those attitudes which respondents might not readily and accurately express, we can use disguised structured techniques. The disguised structured questionnaire is easy to administer and code.

Respondents are given questions which they are not likely to be able to answer accurately. In such circumstances they are compelled to ‘guess at’ the answers. The respondent’s attitude on the subject is assumed to be revealed to the extent and direction in which these guessing errors are committed.

Uses of Motivation Research:

1. Motivation Research leads to useful insights and provides inspiration to creative person in the advertising and packing world.
2. Knowledge and measurement of the true attitude of customers help in choosing the best selling appeal for the product and the best way to represent the product in the sales talk, and in determining the appropriateness and weight age of various promotional methods.
3. Motivation Research can help in measuring changes in attitudes, thus advertising research.
4. Knowledge and measurement of attitudes provides us with an imaginative market segmentation tool and also enables estimating market potential of each additional segment.
5. Strategies to position the offer of the company in a particular market segment should be based on the findings of motivation research.

Limitations of Motivation Research:

1. Cautions are required to be exercised not only in the application of these techniques but also the resultant data should be analysed and interpreted according to the psychological theory.
2. Originally these techniques were developed to collect data from a single individual over a period of time. It is not free from draw backs while we apply these techniques to gather data from a number of individuals.
3. The designing and administering of these techniques need qualified and experimented researchers. Such personnel are not easily available.

Key Managerial Personnel (KMP) or Key Management Personnel refers to the employees of a company who are vested with the most important roles and functionalities. They are the first point of contact between the company and its stakeholders and are responsible for the formulation of strategies and its implementation. The Companies Act mandates certain classes of companies to include such personnel in its ranks. This article looks at this designation which holds a significant place in the Companies Act of 2013.

The definition of Key Managerial Personnel has been made more elaborate in the Companies Act of 2013 as the 1956 Act restricted its scope to a Managing Director, Whole Time Director and Manager. The current definition of the term provides for the inclusion of the Chief Executive Officer (CEO), the Manager, the Managing Director, the Company Secretary, the Whole-Time Director, the Chief Financial Officer (CFO) and such other officers as may be prescribed. For the purpose of this Act, a Key Managerial Personnel (KMP) is considered as an “Officer and an “Officer who is in default”.

It may be noted that companies are prohibited from appointing or employing a Managing Director and a Manager at the same time. Also, no individuals should be appointed or reappointed as the Managing Director, Manager, Whole-Time Director or Chief Executive Officer (CEO) of a Company for a term exceeding five years at a time, and no reappointments are allowed earlier than one year before the expiry of its term (conditions are subject to additional clauses).

Key management personnel are those people having authority and responsibility for planning, directing, and controlling the activities of an entity, either directly or indirectly. This designation typically includes the following positions:

• Board of directors
• Chief executive officer, chief operating officer, and chief financial officer
• Vice presidents

An entity shall disclose key management personnel compensation in total and for each of the following categories

(a) Short-term employee benefits

(b) Post-employment benefits

(c) Other long-term benefits;

(d) Termination benefits

(e) share-based payment.

Compensation includes all employee benefits as defined in Ind AS 19 Employee Benefits including share based payments to employees as per Ind AS 102.  Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of the entity.

If an entity obtains key management personnel services from another entity (the ‘management entity’) [See related party definition point (b) (viii)] in such case, the entity should disclose the amount of fees/compensation paid to the management entity.  Generally, the reporting entity pays agreed amount to the management entity and in return management entity pays to its employees i.e., who managed the reporting entity. The details of payment by the management entity to its employees/directors are not required to be disclosed in the reporting entity financial statements.

According to section 203(1) read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the following companies are mandated to appoint a Whole-time KMP:

• Every Listed Company
• Public Companies having paid-up share capital of 10 Crore rupees or more.
• Public Companies Having paid-up share of 5 Crore rupees or more.
• Companies having paid-up share capital of 10 Crore rupees or more are mandated to appoint a Company Secretary.

Roles and Responsibilities of Key Managerial Personnel

The Management function of implementing important decisions comes under the responsibilities of Key Managerial Personnel. Here are some of the main Roles and Responsibilities of KMP:

As per Section 170 of the Act, the details of Securities held by the Key Managerial Personnel in the company or its holding, subsidiary, a subsidiary of the company or associated companies should be disclosed and recorded in the registrar of the Books.

KMP has a right to be heard in the meetings of the Audit Committee while considering the Auditor’s Report; however they do not have the right to vote.

According to Section 189(2), Key Managerial Personnel should disclose to the company, within 30 days of appointment, relating to their concern or interest in the other associations, which are required to be included in the register.

Procedure of Appointment of KMP

• The appointment of key managerial personnel is prescribed under Section 203 of the Act. Every member of managerial personnel is appointed through a resolution adopted by the Board with terms and conditions of appointment and remuneration.
• A member of managerial personnel can hold the position in one company at a given time. However a member of managerial personnel of a company can be a member of managerial personnel of its subsidiary company.
• In case of vacancy the Board has the responsibility of filling up within six months from the date of such vacancy.
• If the company or its Board tries to violate the provision of appointment of managerial personnel, then the company has to suffer from penalty. The company shall be punishable with fine of rupees one lakh which may extend up to rupees five lakh.
• Every Director and other key managerial personnel shall also be punishable with a fine of Rs.50, 000. If the contravention is continuing, then they would be charged with Rs. 1000 per day after the first offense.

Officer in default

According to section 2(60) of the Act, an ‘officer who is in default ‘shall be liable for any penalty or punishment by way of imprisonment or fine. The officers may include:

Key Managerial Personnel

Whole-Time director’.

Any person who is responsible for maintenance, filing or distributing records or accounts.

Any Director who is aware of the activities taking place is in contravention of the law or the provisions and yet indulges in or participates in it.

Maintenance of Register:

Every Company falling under this provision is required to maintain a register comprising particulars of its Directors and KMPs, which is to be placed at the registered office of the Company. The documents should include the details of securities held by each of them in the company or its holding, subsidiary, subsidiary of a company’s holding company or associate companies. Further requirements of its contents have been mentioned in Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

Significant influence

Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control of those policies.

IND-AS 28 defines significant influence as under:

Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies.

Planning and decision-making are the most important managerial functions, and there are many relations between them. Planning is thinking of doing. Decision-making is a part of planning. Planning is the process of selecting a future course of action, where Decision-making means selecting a course of action.

Decision-making is defined as the process by which different possible solutions or alternatives are identified and the most feasible solution or course of action is finalized. It is an integral part of planning. Decision-making results in selecting the right action among different available options.

It is also one of the important management functions and effective decision-making leads to fulfilling expected goals by sorting out different problems related to such decisions. Decision-making is also a time-bound process and eliminates confusions to reach a conclusion. It has a minimum of two or more alternatives or solutions to a problem so that the best can be decided. If only one alternative is available, then there is no requirement of decision-making.

Relation Between Planning and Decision-Making

Both planning and decision-making are connected to each other. These are the most important aspects of management functions. Planning requires a series of decisions to be incorporated in advance. The foundation of planning is decision-making. The role of a planner demands good decision-making abilities also as the planner has to take a lot of decisions simultaneously. So, decision-making is an important task in planning. Simultaneous and a number of decisions make a plan. In the absence of decision-making, it’s not possible to answer what, how, when, and who is planning. To execute planned activities, decision-making is compulsory.

Different characteristics of decision-making:

1. Process-oriented

Decision-making consists of a process to choose the best solution to a problem among available alternatives. The process includes identifying and analyzing problems, collecting different facts and figures, finding different solutions, and, finally, narrowing down and implementing the best one to meet organizational goals.

2. Demands creativity and Intellectual mind

Decision-making process requires creativity and logical thinking. It demands a lot of mental exercise and other components, i.e. education, experience level, intelligence, etc.

3. Demonstrates commitment

Decision-making process ensures better results based on the decisions made. So, it indicates the commitment of desired results. It requires joint efforts of the team.

4. Ensures the best solution

Decision-making also provides the best solution to any problem as the best solution is decided after evaluating different available alternatives.

5. Impacts of decision-making

Decision-making can be either positive or negative. A positive or right decision can bring positive results and negative or wrong decisions can bring negative results.

6. Decision-making is a final process

After disbursing different activities and tasks, decision-making takes place to get the results of the work done. It is the end result of discussions, comparisons, etc.

7. An ongoing and changing process

Organizations take decisions on a regular basis; so, decision-making is a continuous process. Every decision consists of separate situations that make decision-making a changing process.

Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

• Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others.
• Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities.
• Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
• Strategic decisions involve a change of major kind since an organization operates in ever-changing environment.
• Strategic decisions are complex in nature.
• Strategic decisions are at the top most level, are uncertain as they deal with the future, and involve a lot of risk.
• Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic decision which is achieved through operational decision of reducing the number of employees and how we carry out these reductions will be administrative decision.

Nature of Strategy

Based on the above definitions, we can understand the nature of strategy. A few aspects regarding nature of strategy are as follows:

• Strategy is a major course of action through which an organization relates itself to its environment particularly the external factors to facilitate all actions involved in meeting the objectives of the organization.
• Strategy is the blend of internal and external factors. To meet the opportunities and threats provided by the external factors, internal factors are matched with them.
• Strategy is the combination of actions aimed to meet a particular condition, to solve certain problems or to achieve a desirable end. The actions are different for different situations.
• Due to its dependence on environmental variables, strategy may involve a contradictory action. An organization may take contradictory actions either simultaneously or with a gap of time. For example, a firm is engaged in closing down of some of its business and at the same time expanding some.
• Strategy is future oriented. Strategic actions are required for new situations which have not arisen before in the past.
• Strategy requires some systems and norms for its efficient adoption in any organization.
• Strategy provides overall framework for guiding enterprise thinking and action.

Marketing Strategies

Marketing strategy is the total and unbeatable instrument or a plan shaped and designed specifically for attaining the marketing objectives of a firm. A marketing mission and objectives tell us as to where we want to go and marketing strategy provides us with the grand design for reaching out there.

The borrow the words of Prof. Jerome Mc Carthy “strategy is the all important part of marketing. The one time planning decision the most crucial decision that determines what business the company is in and the general strategy, it will follow may be more important than has ever been realized”

In the words of Mr. Robertson and Yoram Wind, “there are three generic strategies for achieving success in the competitive market place. The first of these is to gain control over the supply or distribution, the second competitive cost advantage and the third product differentiation; marketing as a discipline is critical component of all these three strategies. Marketing performs a boundary role function in the firm’s selection of an appropriate strategy; marketing spares the customer interface and provides the assessment of needs which must ultimately guide all strategy development”.

To quite Michael E. Porter “marketing strategy has mainly one aim to cope up with competition; these are five major and vital forces that decide the nature and intensity of competition the threat of new entrants, bargaining power of customers, bargaining power of suppliers, threat of substitute products and jockeying among the existing contest arts ; the collective strength of these forces determine the ultimate profit potential, of an industry; the strategists goal is to find a position in the industry where his company can best defined itself against these forces or can influence them in his favour; strategy can be viewed as building defences against competitive forces.

In the final analysis marketing strategy stands for competitive marketing actions that are bound to evoke a response from competition. That is why a successful marketer needs to have a comprehensive strategy to tackle competition at any cost.

However, one cannot go to the extent of “any cost” unless one works according to a plan and that is competitive strategy for thumping success in marketing. It is but, therefore, natural that competitive strategy has to be one that will evoke the much sought after competitive advantage. Having given the competitive advantage, the said strategy should give a sustainable competitive edge.

It warrants the thorough investigation and analyses of competition before one hope to have a competitive advantage. Thus competitive investigation, scanning and analysis consist of two things namely, the “long-term profit- opportunity” and owns one’s competitive position.

The ways of out beating competition are:

1. Reducing competition

Perhaps this is the simplest way of fighting out. It sounds well in theory; however in practice it means acquisition of smaller or weaker units which are in competition. Thus, Hindustan Lever acquired TOMACO and Broke Bond acquiring Kissan and Lipton.

2. Joining competition

This is another way out to mitigate competition which is gaining ground. The best example is that of joint venture of Procter and Gamble and Godrej Soaps.

3. Pre-empting competition

This is another way which is a proactive approach, which is very effective particularly when it is backed by competitive analysis. The example of pre-empting competition is that of.

4. To create barriers

This implies forbidding others from entry in the line based on very strong financial and muscle power. Good many companies spend heavily barring others to just think of such extravagance a luxury or a dream for them. The example of this kind is that of.

5. To differentiated the products

It pays to differentiate the products. One must not hesitate to differ his own product with a new to provide better value for the money paid by the customers. It is not only ideal but practical. That is majority of the companies to do it. The examples are good many but we can take toiletotries of all companies.

6. To improve the speed of response

The competitive edge can be further sharpened than one thinks. There are certain manufactured products where speed of response as well as quick source is of top significance.

Though the companies are aware of keeping pace with changing technological tempo they should be well ahead of the same. Quality in consonance with technology has much valid response if it catches the required speed.

7. To divest from regular activities

Instead of moving in the same grow; it should more out of it. The firm should divest out of focus activities. This makes available much wanted scarce recess in the focused activities.

8. To improve efficiency

It is but natural that there is close alliance between important efficiency and the competitive edge. This helps the marketer to distinguish his products though reduced cycle of line and reduced costs.

To restate, a competitive marketing strategy should be such that will give sustainable competitive advantage. One has to be therefore proactive and quick in one’s responses and one should be willing to invest in long-term profits.

Nature of Marketing Strategies

The exact nature of strategy is self evident from the definitions we have gone through.

The nature is clearly spoken by the following points:

1. They are dynamic

The concept of marketing strategy is relative as it is designed to meet the changing demands of a situation. Each situation and event needs a different strategy that is why strategies are revised and recast very frequently to cope up with the changes in a given situation or event.

2. They are futuristic

A marketing strategy is forward looking. It orients towards future. A marketing strategy is designed to bring out the organization from a ditch of degression to the path of progress for better change in the coming times.

3. They are complex

A marketing strategy is a very complex plan impounding in its compound other plans or firms of plans which area must to achieve the organizational goals. It is a compendium or complex of plans within plan to out beat the strength and vitality of others in the line are allied activities.

4. They provide direction

Marketing strategies provide a set direction in which human and physical resources will be allocated and deployed for achieving organisational goals in the face of change environmental pressure, stress and strains and constraints and restraints.

5. They are all covering

Marketing strategies involve the right combination of factors governing the best results. In fact strategic planning warrants not only the isolation of various elements of a given situation but a judicious and critical evaluation of their relative importance.

6. They are a link between the unit and environment

The strategic decisions that are basically related with likely trends in the changing marketing changes in govt., policies, technological developments, ecological change over’s, social and cultural overtones. Then, the ever-changing environment which is external to the organization has impact on it because unit is the sub-systems of supra-system namely environment.

7. They are interpretative

Marketing strategies are the interpretative plans formulated to interpret and give meaning to other plans in the spot-light of a specific situation or situations. They demand an adjustment of plans in anticipator of the reactions of those who will be influenced. Strategic decisions are the result of a complex and intricate process of decision making.

8. They are Top Management Blue-print

Marketing strategies their formulation is the basic responsibility of top management. It is because, it is top management that spells out the missions, objectives and goals and the policies and strategies are the ways to reach them. Thus, top management is not only to say to where to go but how best to go the terminal point.

Essentials of Marketing Strategies

Any marketing strategy to be worth calling as successful or effective must enjoy certain extras which can be called as essentials or requisites of it.

The basic guidelines, used to call a strategy a successful one used by experts are:

1. It is consistent

A marketing strategy to be effective is to be consistent with the overall and specific objectives and policies and other, strategies and tactics of the marketing organization. Interval consistency is an essential ingredient of a good strategy as it identifies the areas where the strategic decisions are to be made imminently or in the long run.

2. It is workable:

Any strategy however laudable and theoretically sound is meaningless unless it is able to meet the ever changing need of a situation. In this business world contingency is quite common and the strategy that strikes at the head to contribute to the progresses and prosperity of marketing organization.

3. It is suitable

A strategy is emergent of situations or environment. It is the subservient of changing environment of business world. It is but natural that any strategy not suiting to .the environment can impound the marketing organization in the compounds of danger, digress and frustration.

4. It is not risky

Any strategy involves risks as uncertainty is certain; what is important is that the extent of the risk involved or associated with strategy is reasonably low as compared to its pay-off or returns. It is because; a high risk very strategy may threaten the survival of the marketing organization, let alone its success, if calculations go fit.

5. It is resource based

A sound strategy is one which is designed in the background of the available resources at its command. A strategy involves certain amount of risk which can hardly be segregated. A strategic decision warrants commitment of right amount of resources to the opportunity and reservation of sufficient resources for an anticipated or “Pass through” errors in such demands of resources.

6. It has a time horizon

The statement “a stitch in time saves nine” that aptly applies to the concept of strategy. A sound strategy is time bound to be used at the nick of the hour and tick of the opportunity. It has an appropriate time horizon. This time this is costlier than money and its horizon banks on the goals to be achieved.

The time should be long enough to permit the organization to make adjustments and maintain the consistency of a strategy.