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HBM Decision Making CMD

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HBM Decision Making CMD

  1. 1. Decision Making in Business Higher/Int 2 Business Management 2009-2010
  2. 2. Decisions? Managers? <ul><li>Whatever a manager does, he does through making decisions. </li></ul><ul><li>These decisions may be a matter of routine . Indeed he may not even realise that he is making them. </li></ul><ul><li>Or they may affect the future existence of the enterprise and require years of systematic analysis. But management is always a decision-making process </li></ul><ul><li>Peter F Drucker </li></ul>
  3. 3. Personal Decisions <ul><li>How many decisions have you made today? </li></ul><ul><li>2 minutes to write down as many as possible </li></ul>
  4. 4. Business Decisions <ul><li>In order to achieve the organisations aims and objectives managers must make decisions … </li></ul><ul><li>… but what about? </li></ul><ul><li>2 minutes to write down as many as possible </li></ul>
  5. 5. Decision Types <ul><li>There are 3 main types … </li></ul><ul><li>But due to popular demand they </li></ul><ul><li>are not be listed here! </li></ul>
  6. 6. Strategic Decisions <ul><li>Long term decisions – looking towards the future </li></ul><ul><li>Set the aims of the organisation </li></ul><ul><li>Made by SMT (CE and BoD)/owners </li></ul><ul><li>No detail about how to achieve </li></ul><ul><li>eg major policy statements </li></ul>
  7. 7. Examples of Strategic Decisions <ul><li>What products will we produce in the future? </li></ul><ul><li>Increase market share by 25% in ten years </li></ul><ul><li>Maximise sales </li></ul><ul><li>To have 100% customer satisfaction (or delight) </li></ul>
  8. 8. Planning for the Long Term <ul><li>Where are we now? </li></ul><ul><li>Where do we want to be in 5, 10, 15 years? </li></ul><ul><li>What resources do we need to achieve this? </li></ul><ul><li>What changes do we need to make in order to achieve our goals? </li></ul><ul><li>How can we do better than the competition? </li></ul>
  9. 9. Mackie’s of Scotland <ul><li>Mackie’s vision is to be a global brand from the greenest company in Britain created by people having fun. </li></ul><ul><li>Mackie’s today is the outcome of effort and foresight of four generations of Mackie’s and their staff. </li></ul><ul><li>Ice Cream is currently the main focus of the business – employing 70 people and producing over 5 million litres of luxury ice cream a year. </li></ul>
  10. 10. Tactical Decisions <ul><li>Medium term decisions – assisting the achievement of strategic decision </li></ul><ul><li>Set the objectives of the organisation </li></ul><ul><li>Detail: How are resources to be used? </li></ul><ul><li>Made by middle management </li></ul><ul><li>Subject to change depending on PESTEC factors </li></ul><ul><li>(later …) </li></ul>
  11. 11. Examples of Tactical Decisions <ul><li>To increase or decrease the number of staff employed </li></ul><ul><li>To rename the business </li></ul><ul><li>To issue more shares on the stock market to fund a new factory </li></ul><ul><li>To merge with a competitor </li></ul><ul><li>To increase the selling price </li></ul><ul><li>To reduce costs </li></ul>
  12. 12. Mackie’s of Scotland <ul><li>Mackie’s move away from pig farming and milk retailing were tactical decisions in order to achieve the strategic aim of making ice cream the focus of their activities </li></ul>
  13. 13. Operational Decisions <ul><li>Day-to-day decisions – made to achieve the objectives (tactical direction) </li></ul><ul><li>Often made in response to changes in circumstances eg secretary is ill and won’t be coming into work </li></ul><ul><li>Operational decision (in this case) might be to transfer another member of the administrative staff to cover her duties </li></ul>
  14. 14. Other Operational Examples <ul><li>Arranging work rotas </li></ul><ul><li>Dealing with customer complaints </li></ul><ul><li>Ordering materials from suppliers </li></ul>
  15. 15. Mackie’s of Scotland <ul><li>Cow welfare is very important, as an unhappy cow does not produce any milk. </li></ul><ul><li>When the cows are housed during the winter, each cow has its own lying space complete with mattress . </li></ul><ul><li>They have feed available at all times , with fresh food added twice per day. </li></ul><ul><li>Our vet comes on a routine visit once a week and any sick animals are moved to a hospital area. </li></ul>
  16. 16. On a Mission … <ul><li>A work force must be able to achieve targets and see relevance to their work. </li></ul><ul><li>Why? </li></ul>
  17. 17. On a Mission … <ul><li>Otherwise they are less productive </li></ul><ul><li>Likely to be demotivated </li></ul><ul><li>May become disruptive </li></ul>
  18. 18. Mission Statement <ul><li>A written summary of strategic aims </li></ul><ul><li>Well publicised </li></ul><ul><li>Helps employees understand what the company is working towards </li></ul><ul><li>Often used in marketing the company’s products </li></ul>
  19. 19. Mission … You will accept!! <ul><li>Using your research skills find some examples of mission statements and comment on how they have been written. </li></ul>
  20. 20. The Manager’s Role <ul><li>Describe a manager … </li></ul><ul><li>2 minutes to think about this </li></ul>
  21. 21. The Manager’s Role <ul><li>A manager: </li></ul><ul><ul><li>Gets things done (through others ) </li></ul></ul><ul><ul><li>Gets things done (with resources ) </li></ul></ul><ul><ul><li>Controls and supervises </li></ul></ul><ul><ul><li>Makes decisions </li></ul></ul><ul><ul><li>In charge of subordinates and department </li></ul></ul><ul><ul><li>Is accountable to the owner(s) </li></ul></ul>
  22. 22. Importance of Managers <ul><li>The quality and performance of the managers determine the success of a business, indeed they determine survival. </li></ul><ul><li>Peter F Drucker </li></ul>
  23. 23. The Nature of Managerial Work <ul><li>A study of what managers do rather than what they ought to do (Mintzberg 1973) </li></ul><ul><ul><li>Interpersonal role </li></ul></ul><ul><ul><li>Informational role </li></ul></ul><ul><ul><li>Decisional role </li></ul></ul>
  24. 24. 5 Functions of Management <ul><li>Plans – setting aims, seeing opportunities and problems, devising solutions </li></ul><ul><li>Organises – resources should be in the right place at the right time </li></ul><ul><li>Commands – tell subordinates what to do </li></ul><ul><li>Co-ordinates – everyone working towards the same goals </li></ul><ul><li>Controls – measures, evaluates and compares results </li></ul><ul><li>Delegates – give authority to subordinates </li></ul><ul><li>Motivates – team-work, empowerment, participate in decisions </li></ul>Studies by Henri Fayol 1913
  25. 25. Effective GROUP Management <ul><li>Derek Torrington (et al) Studies 1989 </li></ul>Making Decisions About ORGANISATIONS RESULTS GOALS UNCERTAINTY PEOPLE
  26. 26. Structured Decision-Making Model <ul><li>P eople O ften G o A lone to D ance at the S ingle’s C lub I n E dinburgh </li></ul>
  27. 27. Structured Decision-Making Model <ul><li>Identify the P ROBLEM </li></ul><ul><li>Identify the O BJECTIVES </li></ul><ul><li>G ATHER information </li></ul><ul><li>A NALYSE information </li></ul><ul><li>D EVISE alternative solutions </li></ul><ul><li>S ELECT from alternative solutions </li></ul><ul><li>C OMMUNICATE the decision </li></ul><ul><li>I MPLEMENT the decision </li></ul><ul><li>E VALUATE </li></ul>
  28. 28. Structured Decision-Making Model <ul><li>(1) Identify the Problem </li></ul><ul><ul><li>Where do we want to go? Achieve? What is wrong? </li></ul></ul><ul><li>(2) Identify the Objectives </li></ul><ul><ul><li>What is it we want to achieve? </li></ul></ul><ul><li>(3) Gather Information </li></ul><ul><ul><li>Extensive collection of internal and external info </li></ul></ul>
  29. 29. Structured Decision-Making Model <ul><li>(4) Analyse Information </li></ul><ul><ul><li>What is relevant? </li></ul></ul><ul><li>(5) Devise Alternative Solutions </li></ul><ul><ul><li>Different courses of action in order to have flexibility </li></ul></ul><ul><li>(6) Select from Alternatives </li></ul><ul><ul><li>Solution most likely to achieve the objectives successfully </li></ul></ul>
  30. 30. Structured Decision-Making Model <ul><li>(7) Communicate the Decision </li></ul><ul><ul><li>to all stakeholders … </li></ul></ul><ul><li>(8) Implement the Decision </li></ul><ul><ul><li>Arrange for resources to be in place </li></ul></ul><ul><li>(9) Evaluate </li></ul><ul><ul><li>Appraise the effectiveness of solutions and take remedial action of necessary </li></ul></ul>
  31. 31. Example No. 1 – Computer Games Industry <ul><li>The problem is a falling market share … </li></ul>
  32. 32. Example No. 2 – Upgrading Technology <ul><li>Apply the “POGADSCIE” model to choose a new laptop for the staff in your firm. </li></ul>
  33. 33. SWOT Analysis Internal Factors External Influences Strengths Weaknesses Opportunities Threats
  34. 34. SWOT Analysis Entrepreneurial skills; Quality of SMT; Market Share; Product Range etc Strengths Where organisation performs well Weaknesses Where the organisation performs poorly Opportunities Profitable future exploits to gain a competitive edge <ul><li>Threats </li></ul><ul><li>Competitors </li></ul><ul><li>Government </li></ul><ul><li>Economic forces </li></ul>
  35. 35. SWOT Analysis <ul><li>Can be used at different levels: </li></ul><ul><ul><li>Person </li></ul></ul><ul><ul><li>Department </li></ul></ul><ul><ul><li>Product </li></ul></ul><ul><ul><li>A range of products </li></ul></ul>Used at the first 4 stages of POGA!
  36. 36. Health Warning! <ul><li>All conclusions must be backed up and justified! </li></ul><ul><li>External factors can be assessed in a subjective manner by different people </li></ul>self confidence to follow business instincts shows real entrepreneurial skills
  37. 37. Costs and Benefits of POGADSCIE and SWOT <ul><li>Benefits </li></ul><ul><li>No rash decisions </li></ul><ul><li>Decisions made with all relevant facts </li></ul><ul><li>Alternative solutions considered </li></ul><ul><li>Logical process – enhances innovation </li></ul><ul><li>Costs </li></ul><ul><li>Ability to collect info (value of) </li></ul><ul><li>Time consuming </li></ul><ul><li>Range of possible solutions difficult in practice </li></ul><ul><li>Can stifle creativity and gut reactions </li></ul>
  38. 38. Constraints on Effective Decisions <ul><li>Availability of finance </li></ul><ul><li>Existing company policy </li></ul><ul><li>Staff may resist change (behaviour/attitude) </li></ul><ul><li>Staff may have tunnel vision, can’t handle complex decisions, fail to consult, indecisive) </li></ul><ul><li>Lack of technology </li></ul><ul><li>Political (Government and EU legislation) </li></ul><ul><li>Economic environment </li></ul><ul><li>Social factors </li></ul><ul><li>Technological developments </li></ul><ul><li>Environmental changes </li></ul><ul><li>Competitors’ behaviour </li></ul>
  39. 39. Which Hat are you? <ul><li>Black – all the negative thoughts regarding an issue </li></ul><ul><li>Green –creative suggestions and ideas about the issue </li></ul><ul><li>Blue – control and organise the thinking on an issue </li></ul><ul><li>White – question what the group thinks </li></ul><ul><li>Red – emotional views giving gut feelings </li></ul><ul><li>Yellow – all the positive benefits of the issue </li></ul>
  40. 40. Outcome of Decisions <ul><li>Managers make the decision but are also responsible for their outcome! </li></ul><ul><li>Constantly </li></ul><ul><li>Organisations must be flexible in order to be successful </li></ul>Alter Evaluate Review
  41. 41. Decentralised Decision Making <ul><li>Advantages </li></ul><ul><li>SMT more time for other issues </li></ul><ul><li>Reduced stress and burdens on SMT </li></ul><ul><li>Juniors more prepared for promotion; motivated and confident </li></ul><ul><li>Decisions made quickly </li></ul><ul><li>Relieves SMT from routine decisions </li></ul><ul><li>Junior staff may have better knowledge of area </li></ul><ul><ul><li>improved quality decision </li></ul></ul><ul><li>Disadvantages </li></ul><ul><li>Decisions not for the benefit of the organisation </li></ul><ul><li>Lack of experience </li></ul><ul><li>Not all managers willing </li></ul><ul><li>Procedures carried out differently (ie not standard) in different branches </li></ul>
  42. 42. Quality Decisions <ul><li>Managers who are capable - training </li></ul><ul><li>Ability to use decision-making techniques </li></ul><ul><li>Quantity and quality of information </li></ul><ul><li>Level of risk acceptable </li></ul><ul><li>Personal interests of decision-maker </li></ul>
  43. 43. ICT in Decision Making <ul><li>Store , Retrieve , Process and Print </li></ul><ul><li>‘ What if?’ situations (Excel) </li></ul><ul><li>Internet – trends/competitors’ products </li></ul><ul><li>Reporting and Presentation Packages </li></ul><ul><li>Too much info? (wheat from the chaff) </li></ul><ul><li>Email bombardment – easy to send to everyone! </li></ul>
  44. 44. Value of Information T imely A ccurate A ppropriate A vailable C omplete C oncise C ost-effective O bjective C cc O A aa T
  45. 45. Aids to Decision Making: Brainstorming <ul><li>Ground rules: </li></ul><ul><ul><li>Focus on quantity : more ideas equals more chance of an effective solution </li></ul></ul><ul><ul><li>Withhold criticism : focus on extending or adding to ideas </li></ul></ul><ul><ul><li>Welcome unusual ideas: suspend all assumptions </li></ul></ul><ul><ul><li>Combine and improve ideas : a single good idea. </li></ul></ul>A group of people get together to try and solve a problem.
  46. 46. Aids to Decision Making: PEST(EC) What do you mean by PEST?
  47. 47. Aids to Decision Making: PEST(EC) … further detail of Opportunities and Threats!
  48. 48. Political <ul><li>Government type and stability </li></ul><ul><li>Environmental/consumer protection legislation </li></ul><ul><li>Levels of bureaucracy and corruption </li></ul><ul><li>Social and employment legislation </li></ul><ul><li>Taxation policy </li></ul><ul><li>Changes in the political environment </li></ul>
  49. 49. Economic <ul><li>Stage of the business cycle </li></ul><ul><li>Current/projected economic growth, inflation and interest rates </li></ul><ul><li>Unemployment and labour supply </li></ul><ul><li>Labour costs </li></ul><ul><li>Disposable income and distribution </li></ul><ul><li>Globalisation </li></ul>
  50. 50. Social-Economic <ul><li>Population growth rate and age profile </li></ul><ul><li>Population health, education and social mobility </li></ul><ul><li>Population employment patterns, job market freedom and attitudes to work </li></ul><ul><li>Social attitudes and social taboos </li></ul><ul><li>Lifestyle choices </li></ul>
  51. 51. Technological <ul><li>Impact of emerging technologies </li></ul><ul><li>Impact of Internet , reduction in communications costs ( remote working ) </li></ul><ul><li>Research and development activity </li></ul>
  52. 52. Congratulations <ul><li>You have completed </li></ul><ul><li>Decision Making in Business </li></ul><ul><li>in </li></ul><ul><li>Higher/Int 2 </li></ul><ul><li>Business Management </li></ul>

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