1. Understanding Business DECISION MAKING

2. Tell the class about one decision you have already made today
QUICK TASK
Tell the class about one decision you have already made today
Some examples:
Time to get up? – on alarm or sleep in
What to have for breakfast? – cereal or toast
What to wear? – jeans or dress code
How to get to school? – walk or by bus
These tend to be routine tasks that do not take long to think about and are easy to make.

3. Now suggest a decision that a Manager might have to make.
Image - Redesign company logo or not
Staffing – Redundancies or ?
Technology - Invest in new or repair
Size - Expand or downsize
Finance - Borrow money or make cutbacks
These tend to be decisions that are made infrequently and take longer to consider. The choices are often more limited due to constraints.

4. WHY MAKE DECISIONS? Allows a business to achieve its objectives
Solves problems that arise
Addresses dynamic pressures on business
Prevents problems arising from unaddressed pressures
Allows management to fulfil their role effectively
Provides a framework to direct an organisation

5. TYPES OF DECISIONS
Strategic
Tactical
Operational

6. STRATEGIC Long term decisions concerning the future
Affects general direction of business
Use to devise policies (gives structure)
Made by senior management or owners
High risk – lots to go wrong
Non-routine
Simple statements – no specific details about how they will be achieved

7. Examples of strategic decisions:
What products to produce?
What market segments to aim for?
To increase market share by 20% within the next 5 years
To maximise sales/profit
To achieve 100% customer satisfaction
To diversify

8. TACTICAL Medium-term decisions
Made by middle (department) or top level managers
Medium risk
Help achieve the strategic aims and objectives
Detailed – describing ways to achieve goals
Constantly under review because of external influences (PESTEC)
Evaluated regularly – are they working?

9. Examples of Tactical decisions:
To hire more staff
To re-name the business (re-branding) – eg Royal Mail to Consignia back to Royal Mail
To issue more shares to raise more capital
To achieve a 10% increase in new orders over the next 6 months
Open a store 24 hours a day to keep up with competitors
To merge with/takeover a rival firm
To introduce an economy drive (cost cutting exercise)

10. OPERATIONAL “Day-to-day” decisions (short term) Carry little risk
Reactionary - responding to a situation
Routine decisions – often made every day
Made by all levels
Often require to be made quickly

11. Examples of Operational decisions:
Organising work rotas
Dealing with customer complaints
Ordering materials from suppliers
Reducing prices to get rid of stock reaching sell-by dates
Arranging cover staff for absentees

12. EXAMPLE
Strategic Decision - Tesco planned to introduce a Financial Service – eg Credit Card Tactical Decisions - what interest rate to charge and credit limits to be allowed Operational Decision - when to send out the statements

13. Everyone who will be affected by the decision.
Who needs to know?
Everyone who will be affected by the decision.
Employees - kept informed of changes and what they are working towards. These must be clearly explained and allow time for consultation.
Change can lead to resistance from staff, which can affect the organisation’s success.

14. Investors – kept informed of changes which might affect their investment. They may vote against changes.
Also:
Owners (business performance)
Managers (tasks to delegate to achieve aims)
Customers (factors affecting buying patterns)

15. Threats SWOT ANALYSIS Strengths Weaknesses Opportunities
INTERNAL FACTORS
EXTERNAL FACTORS

16. The strengths identify areas where the business is doing well at the present time.
Eg having new products in the development stages ready for launch will provide a very good platform for the business to progress.
The weaknesses highlight the areas where issues need to be addressed.
Eg having a high level of borrowing will make the business vulnerable to changes in the economy.

17. Opportunities provide a business with new challenges which could be included in their strategic planning.
Eg to introduce new technology
Threats come from outside the organisation and are often beyond their control.
Eg Economic recession reduces the number of sales

18. Organisational structure Operations New product(s) External factors:
Internal factors:
Finance
Technology
Management
Human resources
Marketing
Organisational structure
Operations
New product(s)
External factors:
Competition
Technological change
Economic factors
Social change
Legislation
Consumer needs/preferences
Recap
A SWOT analysis will help convert identified weaknesses into strengths, and potential threats into opportunities.

19. Internal Present Future External Positive Negative
The SWOT Box
Internal
Strengths
Weaknesses
Present
Opportunities
Threats
Future
External
Positive
Negative

20. Why use SWOT as a decision making tool?
SWOT can help an organisation:
identify any problems and objectives
ensure information is gathered and analysed
devise alternative solutions
assess strengths and weaknesses of the business
allow them to capitalise on strengths and opportunities and minimise weaknesses and threats
evaluate decisions using a second SWOT

21. THE DECISION MAKING PROCESS
Some experienced Managers can make quality spur of the moment decisions. However, success is not always guaranteed. Using a structured decision-making model gives a greater chance of success. A specific example would be POGADSCIE – see core text for additional reading

22. BENEFITS OF A STRUCTURED DECISION-MAKING MODEL
No rash decisions made - time is taken to gather and analyse information
Decisions are made using facts – better quality
Alternative solutions are found - giving choices
Ideas are enhanced by following the process

23. DECISION-MAKING MODEL
COSTS OF A STRUCTURED
DECISION-MAKING MODEL
Time-consuming to follow the processes – may delay decisions being made
Slower to respond to market changes
Developing a range of possible solutions can be difficult to do as internal and external constraints might limit choices
Can stifle creativity and gut reactions to problems

24. The Role of Management in Decision Making
Manager - the person in charge of groups of staff and/or an area of an organisation. They make decisions by evaluating each option when given a choice. They identify ways to deal with problems in an organisation to achieve its aims.

25. Management theorists describe the role of managers in different ways:
“A manager is one who is responsible for getting things done through people instead of doing the job himself” – W F Coventry
“ The quality and performance of the managers determine the success of a business, indeed they determine survival” – Peter Drucker

26. in order to solve problems, make decisions and
These statements summarise the theoretical role management plays within an organisation.
They are:
unifying resources
(bringing together the people, materials and money)
in order to solve problems,
make decisions
and
make sure that the business gets the best possible return from its resources.

27. Henry Mintzberg found that Mangers perform a wide variety of roles which fit into 3 categories:
Interpersonal role – relationship(s) with others
Informational role – gathering and communicating information
Decisional role – making different types of decisions

28. Henri Fayol (management theorist) identified the 5 functions (roles) of managers:
PLAN (look ahead and set aims and strategies)
ORGANISE (ensure resources are in the right place at the right time)
COMMAND (tell others their responsibilities and be a leader)
COORDINATE (ensure resources are working together to achieve the aims)
CONTROL (measure, evaluate and adjust work relative to plans)

29. The Role of a Manager - POCCCDM
More recently 2 other functions have been added :
DELEGATE (give responsibility for actions/decisions to others)
MOTIVATE (encourage others to work effectively)
REMEMBER:
The Role of a Manager - POCCCDM

30. What qualities and skills make a “good” manager?
You can learn these
From your own personality
SKILLS
Communication
Leadership
Organisation
Motivation
Planning
Interpersonal
Numeracy
QUALITIES
Good judgement
Initiative
Innovation
Personal energy
Maturity
Flexibility
Stress-handling
Assertiveness

31. Constraints on Decision-making
Finance may prevent the most effective option be chosen
Employees may limit what can or cannot be achieved
Ability and skills of managers
Policies and procedures of the organisation may place restrictions on decision making
Quality of information
Has the decision making model (eg POGADSCIE and SWOT) be applied properly

32. Leadership Styles Autocratic Manager makes all the decisions
N5 Recap
Leadership Styles
Autocratic
Manager makes all the decisions
Discussion with staff is not encouraged
Work completed on time to a high standard
Can be demoralising
Can lead to high levels of absenteeism and staff turnover
Democratic
Manager makes the final decisions, but include staff in decision-making process
Staff are often highly engaged in projects and decisions
Staff have high job satisfaction and high productivity
Not always effective when a quick decision is required

33. Laissez-faire
Managers give staff a lot of freedom in how they do their work and the deadlines set
Managers provide support with resources and advice if needed
leads to high job satisfaction,
Can cause problems if staff don’t manage their time well, have the knowledge, skills, or self motivation to do their work effectively

34. ICT in Decision Making
Different pieces of hardware and software can aid with decision making.
Internet
Intranet
Spreadsheets
Databases
Word processing
Presentation software
Videoconferencing
Task: How would each piece of ICT be used in decision making

35. Other decision-making aids:
Brainstorming (Thought Shower)
When groups of staff meet to think of as many ideas as possible. No idea is rejected or criticised at this stage.
Benchmarking
Comparing what you do with the best organisation and trying to match their performance.