DECISION MAKING IN BUSINESS

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DECISION MAKING IN BUSINESS
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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

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Pupils in Fortrose Academy WILL wear a
uniform Pupils who do not wear the uniform will
be sent to the Rector Staff will use the
telephone to report pupils
Decisions made by Mr Simpson
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THE TYPES OF DECISION

• STRATEGIC
• Concern the general direction and overall policy
  of the business
• They will be long term decisions
• Tend to be high risk
• Made by high level managers

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demerger
demerger international growth
merger
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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

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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

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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

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WHY MAKE DECISIONS?

• Making the right decision should allow a
  business to achieve its objectives
• Choices always exist
• Problems must be solved

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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

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Tactical decisions

• Most people in senior positions
• Middle managers
• Divisional directors

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Operational decisions

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

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• 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

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THE DECISION MAKING PROCESS

• A model has been developed to assist managers
  when making decisions
• This outlines the steps that should be followed
  to enable a quality decision to be made
• The model is called POGADSCIE

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IDENTIFY THE PROBLEM
IDENTIFY OBJECTIVES
GATHER INFORMATION
DEVISE ALTERNATIVE SOLUTIONS
SELECT FROM SOLUTIONS
ANALYSE INFORMATION
COMMUNICATE DECISION
IMPLEMENT DECISION
EVALUATE OUTCOME
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PUPILS STUDYING PE AND MUSIC FIND THAT THERE IS
NO SCHOOL TRANSPORT AVAILABLE TO GET THEM TO
MATCHES AND CONCERTS
PROBLEM
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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?

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• 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

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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

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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

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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

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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

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MORE DECISION MAKING MODELS

• Aim- to assist managers when faced with
  difficult decisions

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Before making a decision questions must be
answered.

• Where are we now?
• What do we want to achieve?
• What does the future hold?
• To find out the answers we can carry out an
  INTERNAL and EXTERNAL audit

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• INTERNAL AUDIT
• STRENGTHS
• WEAKNESSES

• EXTERNAL AUDIT
• OPPORTUNITIES
• THREATS

SWOT ANALYSIS
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• 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

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The SWOT Box
Internal
Present
Weaknesses
Strengths
Opportunities
Threats
Future
External

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THE ROLE OF MANAGERS IN DECISION MAKING
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What is the role of Management in DM?

• What do managers do?
• Delegate
• Issue resources
• Supervise
• Lead

Fayol 1916 PLAN ORGANISE COMMAND CO-ORDINATE CONT
ROL
Delegate
Motivate
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Henri Fayol

• THE 5 FUNCTIONS OF MANAGEMENT
• French Management Theorist
• Classical School of Management

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Planning Organising Commanding Co-ordinating Cont
rolling
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PLANNING

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

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ORGANISING

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

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COMMANDING

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

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CO-ORDINATING

• Bringing together planning, organising and
  commanding
• Conceptual View of the whole organisation
  required

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CONTROLLING

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

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Also added recently-

• Delegate make subordinates responsible for
  tasks
• Motivate encourage others to carry out tasks
  effectively

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Another theory about management..

• The art of management - GROUP

Goals
Make Decisions about
People
Results
Organisations
Uncertainty
Derek Torrington (1989)
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DECISION MAKING

• THE PROBLEMS

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Decision Making Models

• Using 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

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Decision Making Constraints

• INTERNAL
• Finance
• Company Policy
• Corporate Culture
• Staff Behaviour

• EXTERNAL
• Legislation
• Competition
• Lack of technology
• The economy

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Decision Making Models

• ADVANTAGES
• 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

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SUMMARY

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

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ROLE OF MANAGEMENT

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