Managers at all levels of an organization are constantly making decisions ranging from routine day-to-day operational decisions to long-term strategic decisions that shape the future of the company. Effective decision making involves following a structured process such as identifying problems and objectives, gathering and analyzing information, developing alternative solutions, selecting the best option, implementing it, and evaluating the results. Managers must consider internal factors like resources as well as external factors in the political, economic, social, and technological environment when making decisions to help the organization achieve its goals and objectives.

1. Decision Making in Business Higher/Int 2 Business Management 2009-2010

2. Decisions? Managers? Whatever a manager does, he does through making decisions. These decisions may be a matter of routine . Indeed he may not even realise that he is making them. Or they may affect the future existence of the enterprise and require years of systematic analysis. But management is always a decision-making process Peter F Drucker

3. Personal Decisions How many decisions have you made today? 2 minutes to write down as many as possible

4. Business Decisions In order to achieve the organisations aims and objectives managers must make decisions … … but what about? 2 minutes to write down as many as possible

5. Decision Types There are 3 main types … But due to popular demand they are not be listed here!

6. Strategic Decisions Long term decisions – looking towards the future Set the aims of the organisation Made by SMT (CE and BoD)/owners No detail about how to achieve eg major policy statements

7. Examples of Strategic Decisions What products will we produce in the future? Increase market share by 25% in ten years Maximise sales To have 100% customer satisfaction (or delight)

8. Planning for the Long Term Where are we now? Where do we want to be in 5, 10, 15 years? What resources do we need to achieve this? What changes do we need to make in order to achieve our goals? How can we do better than the competition?

9. Mackie’s of Scotland Mackie’s vision is to be a global brand from the greenest company in Britain created by people having fun. Mackie’s today is the outcome of effort and foresight of four generations of Mackie’s and their staff. 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.

10. Tactical Decisions Medium term decisions – assisting the achievement of strategic decision Set the objectives of the organisation Detail: How are resources to be used? Made by middle management Subject to change depending on PESTEC factors (later …)

11. Examples of Tactical Decisions To increase or decrease the number of staff employed To rename the business To issue more shares on the stock market to fund a new factory To merge with a competitor To increase the selling price To reduce costs

12. Mackie’s of Scotland 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

13. Operational Decisions Day-to-day decisions – made to achieve the objectives (tactical direction) Often made in response to changes in circumstances eg secretary is ill and won’t be coming into work Operational decision (in this case) might be to transfer another member of the administrative staff to cover her duties

14. Other Operational Examples Arranging work rotas Dealing with customer complaints Ordering materials from suppliers

15. Mackie’s of Scotland Cow welfare is very important, as an unhappy cow does not produce any milk. When the cows are housed during the winter, each cow has its own lying space complete with mattress . They have feed available at all times , with fresh food added twice per day. Our vet comes on a routine visit once a week and any sick animals are moved to a hospital area.

16. On a Mission … A work force must be able to achieve targets and see relevance to their work. Why?

17. On a Mission … Otherwise they are less productive Likely to be demotivated May become disruptive

18. Mission Statement A written summary of strategic aims Well publicised Helps employees understand what the company is working towards Often used in marketing the company’s products

19. Mission … You will accept!! Using your research skills find some examples of mission statements and comment on how they have been written.

20. The Manager’s Role Describe a manager … 2 minutes to think about this

21. The Manager’s Role A manager: Gets things done (through others ) Gets things done (with resources ) Controls and supervises Makes decisions In charge of subordinates and department Is accountable to the owner(s)

22. Importance of Managers The quality and performance of the managers determine the success of a business, indeed they determine survival. Peter F Drucker

23. The Nature of Managerial Work A study of what managers do rather than what they ought to do (Mintzberg 1973) Interpersonal role Informational role Decisional role

24. 5 Functions of Management Plans – setting aims, seeing opportunities and problems, devising solutions Organises – resources should be in the right place at the right time Commands – tell subordinates what to do Co-ordinates – everyone working towards the same goals Controls – measures, evaluates and compares results Delegates – give authority to subordinates Motivates – team-work, empowerment, participate in decisions Studies by Henri Fayol 1913

25. Effective GROUP Management Derek Torrington (et al) Studies 1989 Making Decisions About ORGANISATIONS RESULTS GOALS UNCERTAINTY PEOPLE

26. Structured Decision-Making Model P eople O ften G o A lone to D ance at the S ingle’s C lub I n E dinburgh

27. Structured Decision-Making Model Identify the P ROBLEM Identify the O BJECTIVES G ATHER information A NALYSE information D EVISE alternative solutions S ELECT from alternative solutions C OMMUNICATE the decision I MPLEMENT the decision E VALUATE

28. Structured Decision-Making Model (1) Identify the Problem Where do we want to go? Achieve? What is wrong? (2) Identify the Objectives What is it we want to achieve? (3) Gather Information Extensive collection of internal and external info

29. Structured Decision-Making Model (4) Analyse Information What is relevant? (5) Devise Alternative Solutions Different courses of action in order to have flexibility (6) Select from Alternatives Solution most likely to achieve the objectives successfully

30. Structured Decision-Making Model (7) Communicate the Decision to all stakeholders … (8) Implement the Decision Arrange for resources to be in place (9) Evaluate Appraise the effectiveness of solutions and take remedial action of necessary

31. Example No. 1 – Computer Games Industry The problem is a falling market share …

32. Example No. 2 – Upgrading Technology Apply the “POGADSCIE” model to choose a new laptop for the staff in your firm.

33. SWOT Analysis Internal Factors External Influences Strengths Weaknesses Opportunities Threats

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 Threats Competitors Government Economic forces

35. SWOT Analysis Can be used at different levels: Person Department Product A range of products Used at the first 4 stages of POGA!

36. Health Warning! All conclusions must be backed up and justified! External factors can be assessed in a subjective manner by different people self confidence to follow business instincts shows real entrepreneurial skills

37. Costs and Benefits of POGADSCIE and SWOT Benefits No rash decisions Decisions made with all relevant facts Alternative solutions considered Logical process – enhances innovation Costs Ability to collect info (value of) Time consuming Range of possible solutions difficult in practice Can stifle creativity and gut reactions

38. Constraints on Effective Decisions Availability of finance Existing company policy Staff may resist change (behaviour/attitude) Staff may have tunnel vision, can’t handle complex decisions, fail to consult, indecisive) Lack of technology Political (Government and EU legislation) Economic environment Social factors Technological developments Environmental changes Competitors’ behaviour

39. Which Hat are you? Black – all the negative thoughts regarding an issue Green –creative suggestions and ideas about the issue Blue – control and organise the thinking on an issue White – question what the group thinks Red – emotional views giving gut feelings Yellow – all the positive benefits of the issue

40. Outcome of Decisions Managers make the decision but are also responsible for their outcome! Constantly Organisations must be flexible in order to be successful Alter Evaluate Review

41. Decentralised Decision Making Advantages SMT more time for other issues Reduced stress and burdens on SMT Juniors more prepared for promotion; motivated and confident Decisions made quickly Relieves SMT from routine decisions Junior staff may have better knowledge of area improved quality decision Disadvantages Decisions not for the benefit of the organisation Lack of experience Not all managers willing Procedures carried out differently (ie not standard) in different branches

42. Quality Decisions Managers who are capable - training Ability to use decision-making techniques Quantity and quality of information Level of risk acceptable Personal interests of decision-maker

43. ICT in Decision Making Store , Retrieve , Process and Print ‘ What if?’ situations (Excel) Internet – trends/competitors’ products Reporting and Presentation Packages Too much info? (wheat from the chaff) Email bombardment – easy to send to everyone!

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. Aids to Decision Making: Brainstorming Ground rules: Focus on quantity : more ideas equals more chance of an effective solution Withhold criticism : focus on extending or adding to ideas Welcome unusual ideas: suspend all assumptions Combine and improve ideas : a single good idea. A group of people get together to try and solve a problem.

46. Aids to Decision Making: PEST(EC) What do you mean by PEST?

47. Aids to Decision Making: PEST(EC) … further detail of Opportunities and Threats!

48. Political Government type and stability Environmental/consumer protection legislation Levels of bureaucracy and corruption Social and employment legislation Taxation policy Changes in the political environment

49. Economic Stage of the business cycle Current/projected economic growth, inflation and interest rates Unemployment and labour supply Labour costs Disposable income and distribution Globalisation

50. Social-Economic Population growth rate and age profile Population health, education and social mobility Population employment patterns, job market freedom and attitudes to work Social attitudes and social taboos Lifestyle choices

51. Technological Impact of emerging technologies Impact of Internet , reduction in communications costs ( remote working ) Research and development activity

52. Congratulations You have completed Decision Making in Business in Higher/Int 2 Business Management