Successful organizations are different from the opposite of them mainly because of more dynamic and effective leadership. The principles of effective leadership have caused the interest of people for a long time; however, the systematic targeted studying of them has started only recently. Many researches have been made during this time. However, since that time, there is no complete agreement what style of leadership is the most effective.
The efficiency of management depends largely on a leader and his abilities. Management efficiency, in one sense, is the ratio of the performance of organizations and management costs or total costs of organizations and enterprises. In another sense, management efficiency is the ratio of performance of authorities, departments, staff management (number of decisions, calculations), and costs of their achievement.
There are three types of effectiveness:
-economic, which is the ratio of the economic performance of organizations, businesses, and costs of its achieving.
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-social effectiveness is the ratio of social and ethical indicators of organization’s activity, and costs of their achieving.
-socio-economic, which is the ratio of the economic and social activities, and costs of their achieving.
Purpose of leadership is provided by the following factors: the high level of professionalism and creativity of employees, close connections between an organization and environment, product updates, improving a production circle, qualified labor and management, implementation of current plans, and inclusion of all employees in achieving the goals and objectives of the company.
However, an effective leader cannot achieve some of these goals without the process of planning. These goals can be accomplished by future-oriented management decisions. “Working without his business plan”, says Knouf, “would be like driving a car with no steering wheel” (Williams, 2011). Therefore, planning in the broad sense is the formation of management decisions on the basis of preparation system to determine the future events. The plan can be defined as the draft of decisions. Planning is information processing to substantiate future actions, to determine the best way to achieve goals. This is an essential part of leadership.
There are two types of planning: tactical and strategic.
The main advantage of strategic planning is the validity of the targets and a high probability of planned scenarios. The modern pace of economy is so great that strategic planning is the only way to predict the future challenges and opportunities. For senior management of the company, it provides means for creating a plan for the long term and a basis for decision-making. It also reduces the risk of decision-making, enables the integration of the goals and objectives of all departments.
Strategic planning also has some disadvantages that limit its implementation.
Strategic planning cannot give a detailed description of the future. It can give a qualitative description of the state, which a company must seek in the future, which position it may have on the market. It seeks to answer the main question - whether or not a company will survive in competition. Strategic planning does not have a clear algorithm of plan formulation and implementation. It can be defined as particular philosophy or ideology of business.
Strategic planning requires a significant investment of time and resources in its implementation. This can be explained by stricter requirements for the strategic planning.
It must be flexible to respond to changes within the organization and environment. The number of workers in strategic planning is higher than in the perspective. The negative consequences of wrong strategic planning are more serious than of the tactic.
Most western companies believe that the mechanisms of strategic planning should be improved. Features of strategic planning should be additional to current.
Creation of the enterprise organizational culture must be supplemented by tactic, allowing implementing a strategy. Incentive system flexible for management must also exist.
Therefore, the creation of strategic planning should start from bringing order to the control system, improving company management culture, strengthening of executive discipline, and improving the data processing. These all are the tactic issues, or management by objectives (Williams, 2011).
Short-term plans emanating from the strategic are called tactics.
To consider the advantages and disadvantages of tactical planning, some characteristics of tactical plans must be explored. First of all, tactics should be developed within the strategy. Secondly, tactics developed at the level of middle management. Thirdly, tactics designed for a shorter period of time than a strategy.
While the results of the strategy cannot be fully detected in a few years, the tactical results usually occur very quickly, and relate to specific actions.
At the same time, tactical plans distract some resources to strategic objectives. When solving tactical problems, leader can escape from the vision of the organization. It is a disadvantage of the tactic planning in leadership.
It should be mentioned that the both kinds of planning have advantages and disadvantages. Chuck Williams (2011) characterized pros and cons of the process of the planning. Pros of planning in leadership are:
- persistence, which can keep the results of the performance of organization,
- direction, which can provide the way of moving,
- intensified effort (all staff, managers, and employees intensify their efforts, when they act according to the plan).
- creation of task strategy (staff can think about a better way to do a job).
Cons of planning involve the false sense of certainty. A company does not know the exact future, but the whole process of planning can create this sense. Sometimes plans also impede change and adaptation. It means that the leadership can be less flexible to the changes of environment. Third pitfall of planning is the detachment of planners. Detachment leads planners to plan for things they do not understand (Mintzberg, 1994).
Decision-making process is choosing a solution from the available alternatives. Rational decision-making is a systematic process where managers evaluate alternatives, define problems, and choose the optimal solution that provides maximum advantages to their organizations (Williams, 2011). The process of right decision-making includes a range of issues. The successful leader should:
1) Define a problem.
Problem is not only the issue without a solution, but also an opportunity. The information about a problem must be relevant and pertinent.
2) Identify decision criteria, weight the criteria, and formulate constraints.
Restrictions limit the possibility of resources to work, and that can make decisions more realistic. Criteria are the standard which will evaluate the way of the organization. Criteria can be quantitative or qualitative.
3) Generate alternative courses.
In this case, it is necessary to consider the time and cost of the selection process.
4) Evaluate each alternative.
There are a few methods of evaluation. The best of them are the method of average estimation of alternative project earnings, the method of risk consideration, and point rating method.
5) Compute the optimal decision.
Search of the optimal solution is difficult; usually a satisfactory solution is chosen.
Solution is the choice of alternative. The ability to make management decisions develops because of experience. Everyday solutions manager makes without a systematic reflection. Long-term solutions must be thought out. Decision-making is a systematic process in management. The responsibility for making decisions and the consequences for the whole company are the reasons for this.
Programmed organizational decision is the result of the implementation of a programmed organizational decision. It is the result of the implementation of a sequence of step and action sequence. Wrong solutions arise when it is impossible to make a sequence of steps.
There are three main types of management decisions:
1) Intuitive decisions, which are based on the feelings of the manager. According to many successful leaders, many decisions (80%) are based on intuition.
2) Management decisions, which are based on knowledge and experience gained in the past.
3) Rational decisions which are based on the objective analytical process (Clayton, 1980).
Almost all management decisions have negative consequences. Nevertheless, a good leader must understand that the absence of decision has a worse outcome than a bad decision.