Unit 4.4 How Are Decisions Made

WHAT FACTORS AFFECT HOW DECISIONS ARE MADE? How decisions are made will depend upon the:  Size of business  Internal structure of the business  Type of decision  Style of management.

HOW DOES THE SIZE OF A BUSINESS AFFECT HOW DECISIONS ARE MADE? Small Business - As a sole trader, you would be self-employed. As a self- employed joiner or electrician, for instance, you would have the responsibility for everything. Large Business - In such businesses different types of decisions are made at the different levels of management.

HOW DOES THE INTERNAL STRUCTURE OF A BUSINESS AFFECT HOW DECISIONS ARE MADE? In many large businesses the various levels of management take the form of a pyramid. The person at the top of the pyramid has the most authority with the steps down the pyramid indicating more employees on that level with each having less authority. Each person in the pyramid is responsible to the person immediately above them (sometimes referred to as line manager).

Internal Structure of a Business

WHAT TYPE OF DECISIONS ARE AVAILABLE? It is quite common to group decisions into 3 different types:  strategic  tactical  operational

Strategic Decisions These are decisions about the general direction and overall policy of the business. An example of a strategic decision relating to the area of a business would be – what new product to add to the production line. Tactical Decisions These are decisions on how best to use the firm’s resources – such as workers, materials and equipment – in order to ensure that strategic decisions are carried out. An example of a tactical decision relating to the area of a business would be – how to organise the production process to make a new product. Operational Decisions These are day-to-day straightforward, repetitive and routine decisions. An example of a decision relating to operations would be – when to order new materials.

HOW DOES THE STYLE OF MANAGEMENT AFFECT HOW DECISIONS ARE MADE? AUTOCRATIC (or Authoritarian)  Leader decides, announces decision DEMOCRATIC (Consensual or Participative)  Leader presents problem, group decides

AUTOCRATIC MANAGEMENT STYLE This involves management in making most decisions with little or no input from the workers. Management sets the objectives and allocates tasks. An autocratic manager expects his/her decisions to be carried out without question.

DEMOCRATIC MANAGEMENT STYLE This style of management makes full use of people’s ideas and involves them in the decision making process. Managers consult employees in setting the group’s basic objectives, establishing strategies and determining job assignments. Democratic style of management may mean decisions take a long time to make