3.4 Influences on Business Decisions Flashcards
What are the two types of corporate timescale?
Short-termism
Long-termism
What are the four main causes of short-termism in the UK?
Relationship between PLCs and financial markets.
Use of short-term performance measures.
Threat of takeover.
Financial background of may UK bosses.
What are the effects of short-termism in the UK?
Inadequate expenditure on R&D.
Accounting adjustments that inflate current earnings.
Bias towards using profit for high dividend payments or to buy back shares, at the expense of investment.
Adopting pay schemes for directors that focus on short-term financial objectives.
Willingness to cut workforce quickly.
Ignoring long-term risks with products and services such as shifts in consumer habits or potential obselesence.
Lack of investment in image-building advertising.
Minimal training budgets.
What features are long-termist businesses likely to have?
Family owned.
Family run.
People-centred management.
Focus on doing one thing well.
What are the consequences of a long-termist approach?
Less focus on payback as a method of investment appraisal or a willingness to accept projects with longer payback periods.
Greater proportion of profit reinvested rather than paid out as dividends.
Higher commitment to spending on R&D.
What are the effects of evidence-based (scientific) decision making?
Reduces risk of mistakes.
Relies on the future being similar to the past.
May be slower with the need to gather and analyse evidence (‘paralysis by analysis’).
What are the effects of subjective (also called hunch or initiative) decision making?
Can lead to spectacular, avoidable failure.
More likely to lead to revolutionary successes.
Allows for quick decisions.
What are the signs of a strong corporate culture?
Focus on customers’ real needs allowing staff to make decisions.
Staff show a real feeling for the organisation as ‘us’.
United view among staff that the organisation is a force for good.
Sticking together and working together at a time of crisis.
What are the signs of a weak corporate culture?
Staff follow a script when dealing with customers.
‘Us’ tends to be a department not the business as a whole.
‘Them and us’ feeling.
Cynical view among staff, doubting the company’s ethos; suspecting too much PR spin and too little commitment.
When things look bad, better qualified staff look to find another job.
How did Charles Handy classify business cultures?
Power culture
Role culture
Task culture
Person culture
What is power culture?
One or a small group of extremely powerful people lead an organisation.
What is a role culture?
Exists in an established organisation that is dominated by rules and procedures.
What is a task culture?
Project being worked on is the central focus. Project teams become the normal working environment for staff.
What is a person culture?
Operating in organisations with highly skilled, highly professional staff.
Individuals form groups in which they share knowledge and expertise.
What are the characteristics of a power culture?
Everything goes through boss.
Few rules of procedure laid down.
Communication through personal contact.
Decision making likely to be governed by desire to please the boss.
Autocratic leadership style.
