3.2.2 Understanding management decision making


Value of decision making - Scientific

Taylor wanted managers to find 'one best way' then intruct + incentivise workers to follow that method. Believed in 'time and motion' studies - measured exactly how + when workers completed certain tasks. Advocated high DOL, forcing saff to do simple, repetitive tasks. Simple tasks = ease of measurement - from there, short step to business saying 'measurement is management'. Once start measuring in workplace, staff pay more attention + start behaving differently.

Today, managers still want to control variables from absenteeism to morale. Also want to control external variables as much as possible. Sales are forecast w/ great precision + computer software used to model every foreseeable situation.

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Value of decision making -Risk, reward + uncertain

Risk + reward:
May be quantifiable. Must be set against potential rewards. If company has low finances, low-risjk projects only ones to consider, even though reward will be low. Other firms willing to take bigger gambles, figuring few failures not a problem as long as the occasional success is big.

Natural state of affairs in business where many external factors affect sales + costs. Number of variables makes it impossible to predict what will happen. Allows conclusions to be drawn. In uncertain world, business needs wide enough product portfolio to be sure one flop will not hit business too hard,

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Decision trees - Advs

1) Allows for uncertainty - by focusing on uncertainty, can help ensure managers make more carefully considered decisions

2) Demand managers consider all possible alternative outcomes - encourage careful consideration + require an estimate of the actual outcome for each - allows best + worst case scenarios to be costed + considered

3) Quantitative + force assessments of the chances + implications of success + failure

4) Set out problems clearly + encourage a logical approach - can generate new ideas + approaches

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Decision trees - Disadvs

1) All quantitative methods can be biased - optimism can lead to exaggerated sales figures/ excessively high probabilities for success

2) May be difficult to get meaningful data

3) Less useful in case of completely new problems or one-off strategy problems

4) May divery managers from need to take into account qualitative information when making a decision

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Influences on decision making - Mission

Good business decisions contribute to mission - may mean making decisions that go against objectives, possibly due to ethics.

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Influences on decision making - Objectives

Mainly for middle managers - if directors want rising market share, managers will do all they can to deliver. 

Need to consider timescale

Well-run businesses always look to medium-long term when setting objectives. Ensures good decision-making based on true best interests of company

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Influences on decision making - Ethics

Enter business decisions when form part of scientific appraisal of risk + reward - mainly a problem for large businesses that will attract bad press

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Influences on decision making - External environme

Big strategic positions must be rooted in economic, social, competitive + consumer environment of time + future.

Trends in consumer taste most important eg Gillette 2014 profts fell 17.5% as male shaving products struggled due to trend of stubble.

Competition  - issues are how intense is competition + is intensity changing?

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Influences on decision making - Resource constrain

Crucial to consider this BEFORE making business decision

Eg restaurant change can only decide to open 20 more stores in coming year if enough capital + right amount of management talent. 

Don't attempt to do more than you have the resources for

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