This article discusses decision-making in a business environment. While leaders are ultimately responsible for business decisions, problem-solving is a shared responsibility among top managers who make strategic decisions, middle managers who make tactical decisions and lower level managers who make operational decisions. By having accurate information, decisions are more likely to be based on facts, sound reasoning and intelligence. This article will provide an overview of decision making and includes a discussion of factors that lead to good business decisions.
Keywords Business Intelligence; Conflict; Core Values; Decision Making; Decision Tree; Emotional Intelligence; Information; Inquiry Process; Operational Decisions; Strategic Decisions; System Dynamics; Tactical Decisions
Management: Decision Making
One of the earmarks of an effective leader is someone who makes decisions while motivating people to implement them. He or she must learn to communicate and deal with high and low-performing workers and bring out the best in both employees and managers while demonstrating authority and creativity. While leaders have different decision-making styles, a leader needs to choose the right people to participate in the decision-making process and there are some basics steps they must follow.
Leaders need to spot and solve problems while seeking opportunities to move the company forward. In order to do so, accurate information needs to be obtained, and a number of alternatives need to be developed and evaluated for strengths and weaknesses. Decisions are made after developing a number of ideas, debating a variety of options and encouraging an exchange of opinions in order to find the best course of action (Garvin, 2001).
While leaders are ultimately responsible for making business decisions, problem-solving is a shared responsibility among people at different levels in a company. Further, there are different types of decision-making responsibilities and these include strategic decisions, tactical decisions and operational decisions.
Top managers are often responsible for making strategic decisions or decisions that concern the long-term goals of the company. For example, a company might decide to develop new products or focus its efforts on increasing the volume of an existing product. Strategic decisions establish company policy and these decisions are often complicated because the future is uncertain and accurate information is often limited. In these cases, managers must rely on their past experiences as well as their instincts (Janczak, 2005).
There are four techniques available to senior managers. They must be able to generate conflict that needs to be resolved; employees should be encouraged to question existing assumptions; the work environment should be one that encourages learning, and finally, managers need to be able to distinguish between available resources and services and customer needs (Young, 2005).
Once a company's goals and policies are established by senior management, tactical decisions aimed at achieving a company's goals and implementing company policy need to be made. Such decisions are usually made by middle managers and require managers to focus on specific actions that will bring about the company's objectives. For example, a mid-level manager might devise a plan to provide employees with incentives in order to increase production. This requires mangers to have accurate information so that their decisions are based on facts (Abukari, 2003).
Lastly, decisions regarding the day-to-day functions of a business also need to be made. These decisions are considered operational decisions and they are subordinate to strategic and tactical decisions. While these decisions are the responsibility of low-level managers, good decision making is crucial here since such decisions focus on productivity, quality control and employee performance. Moreover, operational decisions can be broken down into:
- Short term planning needs like ordering supplies, establishing work priorities and enlisting temporary help.
- Medium term planning like hiring and firing personnel, purchasing equipment, training individuals and modifying procedures.
- Long term planning like replacing subcontractors, redesigning production facilities and modifying capacity (Copeland, 1986).
Importance of Debate
Although decision-making and problem solving occurs at different levels of a company, leaders are ultimately responsible for every business decision and this requires a leader to have an understanding of strategic, tactical and operational decisions. Further, decision making rests not only on what decisions are made, but who makes them and how they are made. Business decisions often require an inquiry process, developing and debating a number of ideas in order to find the best course of action. This approach to decision making is a test of strength among competing ideas (Garvin, 2001).
In order to encourage debate and a free exchange of ideas, a leader needs to have a high level of emotional intelligence so that he or she can manage conflict that invariably arises in such an environment. Some leaders have a tendency to make decisions that are not based on sound reasoning while other decision makers can be rigid in their dealings with other people. However, leaders that exercise emotional intelligence can motivate people to be creative and to realize a vision (Batool, 2013). In the end, a decision-making process that relies on debating a number of ideas should strive for a balance and a number of factors.
Successful leaders are flexible and open to the ideas of others, but also adhere to a set of core values — essentially an internal determination regarding what a company's goals and aspirations are and how they plan to achieve them. At the same time, decisions must be made with an awareness of the outside world — leaders and managers must be capable of knowing what the truth is outside of the organization. This means understanding what factors are affecting the market. Understanding these factors will allow for good strategic decisions. Further, decision makers need to understand how that market is changing and to what extent the business can contribute to those changes. Such an understanding will lend itself to good tactical decisions. Finally, everyone involved in the decision-making process must understand what the company needs to do in order to be successful in that market as this will result in effective operational decisions (Unseem, 2005).
In the end, all levels of decision-making — strategic, tactical and operational, require access to accurate information. By having accurate information, leaders and managers will be better equipped to make decisions that are based on facts, sound reasoning and intelligence. This information can also be thought of as business intelligence. Effectively employing business intelligence will enable leaders to provide managers with the right information at the right time. Having the right information will ensure that decisions will be based on facts and allow for decisions to be made more quickly. Moreover, because business intelligence relies on factual information, it encourages a rational approach to management (Abukari, 2003).
Importance of Business Intelligence
Most businesses exist to provide goods and services to their customers and this requires decisions on how to deliver those goods, pricing, the handling of unsatisfied customers, and how to treat repeat or high volume customers (Rhode, 2005). Such decisions require "mission critical business intelligence" and there are technologies that enable businesses to understand "customer buying behaviors and preferences," "product pricing and promotion" and "product assortment." By evaluating this information, a business is better able to make operational decisions (Ross, 2007, p. 25)....
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