DECISION MAKING IN BUSINESS

INTERNAL ASSESSMENT CONTENT:- Analysis of different types of decision and can be related to the objectives of a business Explanation of the role of managers in decision making Development and evaluation of SWOT analysis Justification of content of SWOT analysis

THE TYPES OF DECISION STRATEGICSTRATEGIC Concern the general direction and overall policy of the business long termThey will be long term decisions Tend to be high risk Made by high level managers

TACTICAL Made as a result of strategic decisions Tend to be medium term They are tactical because their outcome is more predictable Less risk involved Can be made by middle or high level managers

OPERATIONAL Lower level decisions Sometimes called administrative or routine decisions Short term Carry little risk Many made every day in business Made by low level staff

EXAMPLE Strategic Decision - Tesco decide to introduce a Financial Service - Savings Account Tactical Decision - what interest to charge Operational Decision - date to send out the statements

WHY MAKE DECISIONS? Making the ‘right’ decision should allow a business to achieve its objectives Choices always exist Problems must be solved

Who makes the decisions? STRATEGIC DECISIONS:- The sole trader Partners in a partnership Directors or high level management Government ministers Office bearers in charities or clubs

Tactical decisions Most people in senior positions Middle managers Divisional directors

Operational decisions Section head Manager Team leader Supervisor Individual worker On a day-to-day basis

Managers play a vital role in decision making in an organisation They make different types of decisions They try to achieve the aims of the org They use different methods of decision- making They can be effective (or not) When analysing the role of a manager analyse what they do to make decisions, do they use a model, are they effective etc

THE DECISION MAKING PROCESS A model has been developed to assist managers when making decisions quality decisionThis outlines the steps that should be followed to enable a quality decision to be made POGADSCIEThe model is called POGADSCIE

IDENTIFY THE P P ROBLEM IDENTIFY O O BJECTIVES C C OMMUNICATE DECISION I I MPLEMENT DECISION G G ATHER INFORMATION A A NALYSE INFORMATION D D EVISE ALTERNATIVE SOLUTIONS S S ELECT FROM SOLUTIONS E E VALUATE OUTCOME

PUPILS STUDYING PE AND MUSIC FIND THAT THERE IS NO SCHOOL TRANSPORT AVAILABLE TO GET THEM TO MATCHES AND CONCERTS

Quality of decisions made in the organisation How can organisations ensure that their managers consistently make high quality decisions? How can organisations improve the quality of the decisions that their management make?

Management Training – computer simulations Ensure information given to management is of a high quality Ensure staff are using a decision making process Back up staff who take risks – UK staff are too cautious Ensure that staff if promoted positions are suitable and have a good attitude

HAVE A MISSION STATEMENT Ensure that your staff know what your aims are Ensure that they are aware of the mission statement – publicise it thoroughly FIND MISSION STATEMENTS

What should be included in a Mission Statement Product or Service information Intended customers Benefits offered Why the business has a competitive edge Aims and objectives Responsibilities

How can employees be included in the decision making process? Group meetings Questionnaires Joint Consultation Works councils Quality circles Profit sharing Suggestion boxes Voting Manager integration Brainstorming Union representatives

Why should employees be involved in the decision making process? Motivation Work rate More ideas Employee loyalty Improved quality Better decisions Reduces conflict Reduces labour turnover Meet objectives Good working environment

MORE DECISION MAKING MODELS Aim:- to assist managers when faced with difficult decisions

Before making a decision questions must be answered. Where are we now? What do we want to achieve? What does the future hold? INTERNALEXTERNALTo find out the answers we can carry out an INTERNAL and EXTERNAL audit

INTERNAL AUDITINTERNAL AUDIT STRENGTHS WEAKNESSES EXTERNAL AUDITEXTERNAL AUDIT OPPORTUNITIES THREATS

Strengths of the organisation Weaknesses of the organisation Opportunities in the external environment Threats in the external environment A SWOT analysis is intended to convert identified weaknesses into strengths, and seeming threats into opportunities

THE ROLE OF MANAGERS IN DECISION MAKING

What is the role of Management in DM? What do managers do? Delegate Issue resources Supervise Lead Fayol 1916 PLAN ORGANISE COMMAND CO-ORDINATE CONTROL

Henri Fayol THE 5 FUNCTIONS OF MANAGEMENT French Management Theorist Classical School of Management

PLANNING Set aims Make policies Identify future opportunities Rate priorities for action Analyse problems and make decisions

ORGANISING Allocate available resources between different demands Decide who does what Create responsibilities and communication channels Delegate authority

COMMANDING ‘The buck stops here’ Give leadership Understand people and involve them in teamwork Creating incentives Resolving grievances

CO-ORDINATING Bringing together planning, organising and commanding Conceptual View of the whole organisation required

CONTROLLING Checking progress of planned action Coping with failure and emergencies Supervising – keep in touch with what is happening in the business

Also added recently:- Delegate – make subordinates responsible for tasks Motivate – encourage others to carry out tasks effectively

Another theory about management ….. The art of management - GROUP Make Decisions about

DECISION MAKING THE PROBLEMS

Decision Making Models disadvantagesUsing a structured DM Model has various disadvantages The time-scale required to go through the process The ability to gather all the information required The difficulty of coming up with alternative solutions Lack of creativity There are always various constraints to consider

Decision Making Constraints INTERNAL Finance Company Policy Corporate Culture Staff Behaviour EXTERNAL Legislation Competition Lack of technology The economy

Decision Making Models ADVANTAGESADVANTAGES Time – taking time means a decision is more likely to be effective Quality of decisions are improved due to quantity of information Less likely that decisions will be problematic if a logical approach is followed

SUMMARY AIDS TO DECISION MAKING POGADSCIE SWOT ANALYSIS BRAINSTORMING PEST ANALYSIS TRAINING OF MANAGEMENT

ROLE OF MANAGEMENT Did management use a decision making model? Look for evidence of problems, gathering information, alternative solutions etc