b&w presentation 05 - decision making 1 qualitative
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Business & CommercialAwareness
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Lecture 5: Decision Making 1 Qualitative
j.a.g.willard@herts.ac.uk
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Learning Outcomes• To appreciate the different types of decision
– Qualitative vs quantitative– Proactive vs reactive– Null decisions
• To understand and be able to identify strategic, tactical and operational decisions
• To be aware of the role of politics and personal agendas in business decision making
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Decisions
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RECAP: In business nothing stands still; for instance:• Technology advances• Markets rise and fall• Competitors enter and exit• Businesses acquire or lose assets
These changes require businesses to react:
The initial reaction requires:• Analysis• Development of options for action• DECISION
This and the next lecture focus on Decisions
Decision Types
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Reactive Proactive
Strategic Tactical Operational
Null
Qualitative Quantitative
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Qualitative Quantitative
Decisions require consideration of both types of factors, but one usually predominates. However it is rare that a decision is wholly of one type
Non-numerical inputs eg:Opinions
Stakeholders’ feelings & attitudesAssessments of likely behaviours
Organisational politics
People related factors
Some analytical techniques
Different decisions are likely despite the same inputs
Based on judgment or subjectivity
Numerical inputs eg:Market research
ForecastsHistorical data
Data related factors
Many analytical techniques
Repeatable, consistent
Objective as they are based on certainty or probability
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Reactive Proactive
Proactive decisions are preferable but not always possibleSuccessful businesses make more proactive than reactive decisions
A decision made after an event
Event could be internal or external to the business, eg:Competitor activity
Legal changeTechnological advance
Change in consumer preferencesMachinery breakdown
Labour strike
Events may be foreseeable
Impact of decision is lateridentify change analyse decide
A decision made before an event or a unilateral business initiative
Decisions can relate to external or internal factors eg:Product launches
New plant using new technologyTakeovers and mergers
Expansion into new markets
Always involve anticipation
Greater risk and hence may fail
Impact of decision is earlierspot opportunityanalysedecide
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Strategic
Tactical
Operational
Decisions with long term impact which determine the overall direction of the whole business and how it will get there, eg:A strategic decision for a fast food restaurant would be the food type (burgers, pizza etc), or the territories in which to operate
Decisions of a shorter time horizon that relate to how to achieve the long term strategy eg:For the fast food restaurant, should they buy existing restaurants, build their own, lease etc;should they make all food from raw materials or use pre-prepared food that they cook or reheat
Decisions which determine how individual functions run . They have much shorter time frames eg:For the fast food restaurant, which towns and precise sites do they operate from, what are the opening hours, what is on the menu
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Null Decisions
“A decision to do nothing”•This is still a decision - it is not avoiding change•Sometimes the best action following an event or when faced with an opportunity is to do nothing, eg:
• A drop in interest rates creates an opportunity or need for action• A bank reviews the situation and decides not to cut its rate to savers
•This would be an ACTIVE null decision•They may be the hardest decisions to take and can show great business courage or foresight
BUT• A null decision can also be made by DEFAULT• There is no conscious human thought process• The same state continues due to:
1. Ignorance that something has changed or that a decision is needed2. Lack of resource or skill to analyse the situation3. Laziness – the business cannot be bothered to think or take action
• Whilst a good outcome may result, this is not due to good business practice
Making Qualitative Decisions
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G e n e r a l l y d e c r e a s i n g a c c u r a c y
MCDAeg Solution Matrix(see the last and the next lecture for more on this)
• Identify quantitative factors• Weight them for importance. Score, Multiply and Add them• Choose decision with highest score• It is a pseudo quantitative decision• An audit trail exists
Group decision • All decision makers meet• Discussion – views shared, debated• Consensus decision or vote decision based on average view• Averaging gives better decisions but beware committee thought• If minutes of meeting are taken then there is an audit trail
Subjectiveunbiased decision
• One person assesses the facts, analysis, opinions• Filtered through their own perceptions, values and beliefs• Open to sub-conscious bias and a misleading confidence• Generally quick but sub-optimal and no audit trail
Subjectivebiaseddecision
• Individual decision maker – or a key influencer’s input• ‘Correct’ decision is manipulated by a personal agenda • No open acknowledgment of the bias• No audit trail or maybe a deliberately false one will exist
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Qualitative decisions involve judgment, interpretation, opinion
A good decision is one that most ‘experts’ would reach
BUT few decisions are repeated – they are one offs
It is very possible to justify one-off decisions on ‘the facts available at the time” – and you can even carefully groom the
factsSo, most qualitative decisions can be manipulated . . . .
. . . to meet personal rather then best business interest objectives
It is hard to spot the manipulation or even who is doing itThe result is a political decision and
A decision not in the best interests of the business
POLITICAL DECISIONSDecisions concerned with power which are carried out for reasons that best serve a desired outcome, rather than for other reasons such as being morally justifiable *
* Encarta Dictionary
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Reasons behind political decisions
Driver Possible Counter
Fear of the ‘correct’ decision Discuss reasons for fear with the decision maker and explore ways to counter these fears or reasons for them
Self-advancement / role protection Alert other decision makers/influencers and suggest they act. Care as this is ‘whistle blowing’ – role protection can be a fear
Avoidance of work or responsibility Discuss reasons and remedies with decision maker (eg: lack of skill, fear of work overburden, no buy-in to the work, laziness)
Intra-business conflict Alert other managers, try to understand the causes and look for ways to reduce conflict. Role changes may be needed
Business sabotage/vendetta Inform top management. This may result in legal action, so be careful: investigate thoroughly, get evidence, look for allies
Competitor inspired activity Inform top management. This may result in legal action, so be careful: investigate thoroughly, get evidence, look for allies
There are many possible drivers for political decisions
decision makers will not advertise them, but . . . .
. . . . it is often possible to identify them
. . . . and then action to counter them may be taken
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Warnings concerning political decisions
1. Counters involving discussion with the political decision maker are always possible
This can identify the cause and a remedy, but is very risky unless you have personal power
It can also result in denial and even more deeply submerged political behaviour
2. To take action you need to be aware that it is happening
Business people playing this ‘game’ are experienced and clever. They will mislead you. A badly aimed attempt to address the issue can damage the business and especially you. Be cautious and cover yourself
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An agenda is a list of possible outcomes which are open for general discussion
A deeply hidden agenda is a list of outcomes not open for discussion and where their mention is actively avoided
BUT someone is trying to make them happen
Some hidden agendaoutcomes may be
broughtto the surface if they areopenly discussed byothers . . . . .
. . . .or if the hidden agendaholder can be persuadedto discuss them ie: tounhide them
Why do hidden agendas exist?
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ReasonsAnd Examples
Desire of the outcome but no
wish to be associated with it
Feelings that their open support
could prevent its adoption
Personal reasons which
have no business basis
Personal hidden dislike / vendetta
against a key agenda supporter
HR Director favours a redundancy programme but wants to appear as a
champion of the workforce
Sales Director does not want the sales office to move to London from Cardiff as his children will have to move school and his wife is very unhappy about this
Manager who lost out in promotion race tries to railroad an important business initiative championed by their rival
CEO known to want the HQ to move from London to NY, hides support for acquisition of a large
NY based competitor
Handling hidden agendas
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• Hidden agendas are hard to spot and harder to deal with• Keep an eye open for non-typical behaviour• Watch for those who are advocating non-logical decisions
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In this lecture we have learned:•Business decisions can be categorised:
• On a range from Quantitative to Qualitative• As proactive or reactive• As Strategic, Tactical or Operational• And if there is no action, as Active or Default Null Decisions
•There are 4 broad categories of qualitative decisions1.analytical 2.group decisions 3.personal unbiased 4.personal
biased
•Qualitative decisions can be sub-optimal due to political factors and the presence of hidden agendas
• We have identified the major reasons for this, and• Some methods to handle these situations
Summary
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