Good Stuff Happens in 1:1 Meetings: Why you need them and how to do them well
Economics assngmt
1. Introduction:
Decision making is a daily activity for any human being. There is no
exception about that. When it comes to business organizations, decision
making is a habit and a process as well.
Effective and successful decisions make profit to the company and
unsuccessful ones make losses. Therefore, corporate decision making
process is the most critical process in any organization.
In the decision making process, we choose one course of action from a few
possible alternatives. In the process of decision making, we may use many
tools, techniques, and perceptions.
In addition, we may make our own private decision or may prefer a
collective decision.
Usually, decision-making is hard. Majority of corporate decisions involve
some level of dissatisfaction or conflict with another party.
Let.s have a look at the decision making process in detail.
2. Steps of Decision Making Process:
Following are the important steps of the decision making process. Each step maybe supported by different tools
and techniques
3. • Step 1: Identification of the purpose of the decision:
• In this step, the problem is thoroughly analysed. There are a couple
of questions one should ask when it comes to identifying the
purpose of the decision.
• What exactly is the problem?
• Why the problem should be solved?
• Who are the affected parties of the problem?
• Does the problem have a deadline or a specific time-line?
• Step 2: Information gathering:
• A problem of an organization will have many stakeholders. In
addition, there can be dozens of factors involved and affected by the
problem.
• In the process of solving the problem, you will have to gather as
much as information related to the factors and stakeholders involved
in the problem. For the process of information gathering, tools such
as 'Check Sheets' can be effectively used.
4. • Step 3: Principles for judging the alternatives:
• In this step, the baseline criteria for judging the alternatives should be setup. When it comes to
defining the criteria, organizational goals as well as the corporate culture should be taken it to
consideration.
• As an example, profit is one of the main concerns in every decision making process. Companies
usually do not make decisions that reduce profits, unless it is an exceptional case. Likewise,
baseline principles should be identified related to the problem in hand.
• Step 4: Brainstorm and analyse the different choices:
• For this step, brainstorming to list down all the ideas is the best option. Before the idea
generation step, it is vital to understand the causes of the problem and prioritization of causes.
• For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool. Cause-and-
Effect diagram helps you to identify all possible causes of the problem and Pareto chart helps
you to prioritize and identify the causes with highest affect.
• Then, you can move on generating all possible solutions (alternatives) for the problem in hand.
• Step 5: Evaluation of alternatives:
• Use your judgement principles and decision-making criteria to evaluate each alternative. In this
step, experience, and effectiveness of the judgement principles come into play. You need to
compare each alternative for their positives and negatives.
5. • Step 6: Select the best alternative:
• Once you go through from Step 1 to Step 5, this step is easy. In addition, the
selection of the best alternative is an informed decision since you have already
followed a methodology to derive and select the best alternative.
• Step 7: Execute the decision:
• Convert your decision into a plan or a sequence of activities. Execute your plan by
yourself or with the help of subordinates.
• Step 8: Evaluate the results:
• Evaluate the outcome of your decision. See whether there is anything you should
learn and then correct in future decision making. This is one of the best practices that
will improve your decision-making skills.
• Conclusion
• When it comes to making decisions, one should always weigh the positive and
negative business consequences and should favour the positive outcomes.
• This avoids the possible losses to the organization and keeps the company running
with a sustained growth. Sometimes, avoiding decision-making seems easier;
specially, when you get into a lot of confrontation after making the tough decision.
• But, making the decisions and accepting its consequences is the only way to stay in
control of your corporate life and time.
6. •
•
• organisation - decision-making in business
• Richard Bowett outlines the main methods of business decision-making
• Introduction
• Decision-making is a crucial part of good business. The question then is ‘how is a good decision made?
• One part of the answer is good information, and experience in interpreting information. Consultation ie seeking
the views and expertise of other people also helps, as does the ability to admit one was wrong and change one’s
mind. There are also aids to decision-making, various techniques which help to make information clearer and
better analysed, and to add numerical and objective precision to decision-making (where appropriate) to reduce
the amount of subjectivity.
• Managers can be trained to make better decisions. They also need a supportive environment where they won’t be
unfairly criticised for making wrong decisions (as we all do sometimes) and will receive proper support from their
colleague and superiors. A climate of criticism and fear stifles risk-taking and creativity; managers will respond by
‘playing it safe’ to minimise the risk of criticism which diminishes the business’ effectiveness in responding to
market changes. It may also mean managers spend too much time trying to pass the blame around rather than
getting on with running the business.
• Decision-making increasingly happens at all levels of a business. The Board of Directors may make the grand
strategic decisions about investment and direction of future growth, and managers may make the more tactical
decisions about how their own department may contribute most effectively to the overall business objectives. But
quite ordinary employees are increasingly expected to make decisions about the conduct of their own tasks,
responses to customers and improvements to business practice. This needs careful recruitment and selection,
good training, and enlightened management.
7. • Types of Business Decisions
• 1. Programmed Decisions These are standard decisions which
always follow the same routine. As such, they can be written down
into a series of fixed steps which anyone can follow. They could
even be written as computer program
• 2. Non-Programmed Decisions. These are non-standard and non-
routine. Each decision is not quite the same as any previous
decision.
• 3. Strategic Decisions. These affect the long-term direction of the
business eg whether to take over Company A or Company B
• 4. Tactical Decisions. These are medium-term decisions about
how to implement strategy eg what kind of marketing to have, or
how many extra staff to recruit
• 5. Operational Decisions. These are short-term decisions (also
called administrative decisions) about how to implement the tactics
eg which firm to use to make deliveries.
10. • The model in Figure 2 above is a normative model, because it illustrates
how a good decision ought to be made. Business Studies also uses
positive models which simply aim to illustrate how decisions are, in fact,
made in businesses without commenting on whether they are good or bad.
• Linear programming models help to explore maximising or minimising
constraints eg one can program a computer with information that
establishes parameters for minimising costs subject to certain situations and
information about those situations.
• Spread-sheets are widely used for ‘what if’ simulations. A very large
spread-sheet can be used to hold all the known information about, say,
pricing and the effects of pricing on profits. The different pricing
assumptions can be fed into the spread-sheet ‘modelling’ different pricing
strategies. This is a lot quicker and an awful lot cheaper than actually
changing prices to see what happens. On the other hand, a spread-sheet is
only as good as the information put into it and no spread-sheet can fully
reflect the real world. But it is very useful management information to know
what might happen to profits ‘what if’ a skimming strategy, or a penetration
strategy were used for pricing.
11. • The computer does not take decisions; managers do. But it helps
managers to have quick and reliable quantitative information about
the business as it is and the business as it might be in different sets
of circumstances. There is, however, a lot of research into ‘expert
systems’ which aim to replicate the way real people (doctors,
lawyers, managers, and the like) take decisions. The aim is that
computers can, one day, take decisions, or at least programmed
decisions (see above). For example, an expedition could carry an
expert medical system on a lap-top to deal with any medical
emergencies even though the nearest doctor is thousands of miles
away. Already it is possible, in the US, to put a credit card into a
‘hole-in-the-wall’ machine and get basic legal advice about basic
and standard legal problems.
12.
13. • Organizational Decision Making Landscape
• Click to watch a VideoThis framework explores the dynamics of
decision making in a model that would ensure balanced and
focused decision making in your organization. It is important to
manage decion making like any other aspect of the organization.
Decision management can excel your company to increased
success. This framework provides a conceptual model for
excellence in organizational decision making management and
practice.
• It is very importance for the long term survival of an organization
that good decision making practices are followed, as well as sound
decision support services. Making good decisions is without any
doubt one of the pivotal skills to ensure long term success in the
knowledge economy. This framework provides the foundation on
which such a sound decision making practice can be developed in
an organization.
15. • The need for decision-making may be stated as follows:
• Decision-making makes it possible to adopt the best course of action in
carrying out a given task. When there are different ways of performing a
task, it becomes necessary to find out the best way and that is what
decision-making is all about. The course of action finally selected should
produce the best results.
• By choosing the best method of doing any work, decision-making ensures
optimum use of the enterprise resources, namely, men, machines, materials
and money. Resources are always scarce and therefore, it is necessary to
make a proper use of the same.
• Decision-making helps to find a solution to any problem in a work place. For
example, if an organization faces the problem of low productivity, such a
problem cannot be ignored and it becomes necessary to find a remedy. To
find a remedy, the actual cause of the problem must be identified after which
corrective action may be taken. If negative employee attitude is found to be
the root cause of low productivity, the management may have to decide on
the right course of action to be adopted to change such a negative attitude.
16. • Decision-making helps to identify the best course of action in each
given situation and thereby promotes efficiency. The course of
action finally selected should be acceptable to both the workers and
the management. Satisfied workers put in their best efforts and this
result in higher output. Higher output satisfies the management and
it may come forward to share the gain with the workers. Thus, there
is improvement in the overall efficiency of the organization.
• The conflicts in an organization are resolved through decisions. For
example, the workers may want better pay and improved working
conditions and put forth their views to the management. If the
management avoids taking a decision on the matter, the workers
are not going to give up. A decision, therefore, becomes necessary.
Such a decision need not be one-sided decision. The management
may evolve a formula that is acceptable to the workers as well.
17.
18. • Economic models help managers and economists analyze the economic decision-making process. Each
model relies on a number of assumptions, or basic factors that are present in all decision situations. Almost
everyone in society engages in economic decision making at some point, from the billionaire investing in real
estate, to the small business owner signing a contract with a supplier, to the teenager buying a video game or
applying for a job; and these basic factors almost always come into play.
• Working on a Budget
• Even the wealthiest individuals and organizations have a limited amount of capital resources to work with. The
constraints of a budget influence nearly all economic decisions, since the sum of all expenditures should
never exceed the availability of capital. Cash availability is not always a direct limiting factor in economic
decision making, since credit arrangements can allow people to spend more than they have. Even with credit
purchase agreements, however, borrowers still take into account the ability to repay the debt over time, which
brings the decision back to the issue of budgets and limited resources.
• Maximizing Value
• The fundamental basis of economic decision making is individuals' or organizations' desire to maximize
benefits while minimizing costs. This balancing act is referred to as maximizing value, and it is a skill that
takes practice to master. For individuals, value maximization decisions may include choosing between name-
brand products and generic products, and choosing between small or bulk sizes. For a company, value
maximization involves finding the lowest-cost suppliers that meet the company's quality standards, then
determining the economic order quantity (EOQ) for each purchase. Economic order quantity is the perfect
amount of a product or material to order at a time, taking advantage of quantity discounts while also keeping
holding and transportation costs under control.
19. • Rational Decision Making
• Nearly all economic models and theories have one irreconcilable flaw: they assume
that all economic decision makers act logically and rationally, taking all available
information into account in an objective manner before making a decision. While it is
true that most people and organizations attempt to do this, the reality of economic
decisions is slightly different. Emotional theory in the stock market is a prime example
of people's inability to make purely rational decisions on a consistent basis. Emotional
theory states that everyone is influenced by his past experiences, expectations,
emotional state and emotional memory when making a decision. People can place
too much emphasis on certain information, such as recent news or bad news, which
can skew their rational decision making as well.
• Costs Versus Benefits
• Costs and benefits are key factors that all economic decision makers take into
account. Families, small business owners and others weigh the benefits and costs of
decisions related to purchases, investments, sales and other expenditures before
making a decision. This concept is similar to the idea of value maximization, with a
distinct difference. Cost-benefit analyses assume that for every decision, something
must be gained and something must be lost. Even in investment decisions, there is
an opportunity cost—the cost of not using the money in another way—that must be
considered. The goal of economic decision making is to make tradeoffs that allow you
to gain more than you lose each time.
