LEVELS OF MANAGEMENT: WHAT KINDS OF DECISIONS ARE MADE?
Each level of management can be differentiated by the types of decisions made, the time frame considered in the decisions, and the types of report information needed to make decisions. (See Table 25-1).
A COMPARISON OF THE MISS
AT THE OPERATIONAL, TACTICAL, AND STRATEGIC LEVELS
The largest level of management, lower (operational) management, deals mostly with decisions that cover a relatively narrow time frame. Lower management, also called supervisory management, actualizes the plans of middle management and controls daily operations-the day to day activities that keep the organization humming. Examples of a lower level manager are the warehouse manager in charge of inventory restocking and the materials manager responsible for seeing that all necessary materials are on hand in manufacturing to meet production needs.
Most decisions at this level require easily defined information about current status and activities within the basic business functions-for example, the information needed to decide whether to restock inventory. This information is generally given in detail reports that contain specific information about routine activities. These reports are structured, so their form can usually be predetermined. Daily business operations data is readily available, and its processing can be easily computerized. Managers at this level typically make structured decisions. A structured decision is a predictable decision that can be made by following a well defined set of predetermined, routine procedures. For example, a clothing store floor manager`s decision to accept your credit card to pay for some new clothes is a structured decision based on several well-defined criteria:
Does the customer have satisfactory identification?
Is the card current or expired?
Is the card number 011 on the store`s list of stolen or lost cards?
Is the amount of purchase under the cardholder`s credit limit?
The middle level of management deals with decisions that cover a somewhat broader range of time and involve more experience. Some common titles of middle managers are plant manager, division manager, sales manager, branch manager, and director of personnel.
The information that middle managers need involves review, summarization, and analysis of historical data to help plan and control operations and implement policy that has been formulated by upper management. This information is usually given to middle managers in two forms: (1) summary reports, which show totals and trends- for example, total sales by office, by product, by salesperson, and total overall sales-and (2) exception reports, which show out of the ordinary data-for example, inventory reports that list only those items that number fewer than 10 in stock. These reports may be regularly scheduled (periodic reports), requested on a case by case basis (on demand reports), or generated only when certain conditions exist (event initiated reports).
Periodic reports are produced at predetermined times-daily, weekly, monthly, quarterly, or annually. These reports commonly include payroll reports, inventory status reports, sales reports, income statements, and balance sheets. On demand reports are usually requested by a manager when information is needed for a particular problem. For example, if a customer wants to establish a large charge account, a manager might request a special report on the customer`s payment and order history. Event initiated reports usually clear with a change in conditions that requires immediate attention, such as an out of stock report or a report on an equipment breakdown.
Managers at the middle level of management are often referred to as tactical decision makers who generally deal with semistructured decisions. A semistructured decision is a decision that includes some structure procedures and some procedures that do not follow a predetermined set of procedures. In most cases, a semistructured decision is complex, requiring detailed analysis and extensive computations. Examples of semistructured decisions include deciding how many units of a specific product should be kept in inventory, whether or not to purchase a larger computer system, from what source to purchase personal computers, and whether to purchase a multiuser minicomputer system. At least some of the information requirements at this level can be met through computer based data processing.
The top level of management deals with decisions that are the broadest in scope and cover the widest time frame. Typical titles of managers at this level are chief executive officer (CEO), chief operating officer (COO), chief financial officer (CFO), treasurer, controller, chief information officer (CIO), executive vice president, and senior partner. Top managers include only a few powerful people which are in charge of the four basic functions of a business-marketing, accounting and finance, production, and research and development. Decisions made at this level are unpredictable, long range, and related to the future, not just past and/or current activities. Therefore, they demand the most experience and judgment.
A company`s MIS must be able to supply information to top management as needed in periodic reports, event initiated reports, and on demand reports. The information must show how all the company`s operations and departments are related to and affected by one another. The major decisions made at this level tend to be directed toward (1) strategic planning-for example, how growth should be financed and which new markets should be tackled first; (2) allocation of resources, such as deciding whether to build or lease office space and whether to spend more money on advertising or the hiring of new staff members; and (3) policy formulation, such as determining the company`s policy on hiring minorities and providing employee incentives. Managers at this level are often called strategic decision makers. Examples of unstructured decisions include deciding five year goals for the company, evaluating future financial resources, and deciding how to react to the actions of competitors.
At the higher levels of management, much of the data required to make decisions comes from outside the organization (for example, financial information about other competitors). Table 25-2 shows the decision areas that the three levels of management would deal with in (a) a consumer product business and (b) a bank.