Business Decision Making Flashcards
What are the 5 stages of decision making?
- Find and Define the problem
- Generate and Evaluate alternate solutions
- Select preferred solution and conduct ethics double check
- Implement the solution
- Evaluate Results
What are the 3 different approaches to decision making?
- Divergent thinking
- Convergent thinking
- Lateral Thinking
Divergent Thinking
A thought process or method used to generate creative ideas by exploring many possible solutions
Convergent Thinking
Narrows the available problem solutions to determine the single best solution
Lateral Thinking
Involves using indirect and creative means to develop ideas.
Intuitive Thinking
Reliance on a ‘hunch’, ‘gut instinct’ or a feeling about what we should do
What can impact effective decision making?
- Inexperience
- Cognitive Bias
- Improper Process
- Inadequate Training
- Cultural Differences
- Over compliance
- Oversimplification
- Lack of resources
- Insufficient Timelines
What is effective decision making?
- Successful
- Responsible
- Robust
- Defensible
- Inclusive
Importance of Decision Making - Organization Performance
Decision making is a key driver of organization performance. Companies which are better in making decisions perform better financially.
Importance of Decision Making - Financial Performance
There is a strong correlation between decision effectiveness and financial performance (e.g. revenue growth, return on capital, shareholder return), and employee engagement (Blenko et al., 2010).
Importance of Decision Making - Ethical decision making
You should not underestimate the ripple out effect of short sighted or unethical decision making. Investors and shareholders are demanding greater levels of accountability for corporations who engage in deceitful and exploitative practices.
Importance of Decision Making - Consider those affected
While financial gain is a key driver for many businesses, effective decision-making requires careful consideration of who and what might be affected along the way.
Importance of Decision Making - Power to change business practices
Reflect on the power of decision-making to change the way a business could
- treat its employees
- impact the environment
- engage with local communities and cultural groups
Importance of Decision Making - Social responsibility and reputation
Businesses these days are not only under pressure to make decisions that comply with the law. There is also an increasing expectation they will be ethical and socially responsible. Failing to do so risks damage to the business’s reputation and its bottom line. Corporate condemnation via social media and global news outlets is a steep price to pay for deciding to prioritize short term financial goals above all others.
What is a decision?
A choice made from 2 or more alternatives.
What are two common types of decisions that are made?
Programmed - for routine matters, easy to determine what information is required and solution may be developed from past experience.
Non-Programmed - New or unexpected situations, may be difficult to access necessary information to make an effective decision
What are the three types of management decisions?
- Strategic Decisions - long term needs and setting overall goals - usually made by senior executives and focus on the next 5 years
- Tactical decisions - reflect how strategic decisions can be achieved - made by middle management and focus on next 12 months
- Operational decisions - manage day to day activities - made by lower management
What are the three different conditions that business decisions are made under?
- Certain environment - predictable and less risk, sufficient information available about alternative actions and outcomes
- Risk environment - information about alternative courses and outcomes are available but incomplete - risk - must estimate probabilities
- Uncertain environment - high level of uncertainty and ubiquity - must rely on intuition or collaborate for group problem solving
What information do top managers assess?
Formulate strategies, policies, long-term plans and objectives; make strategic decisions
What information do middle managers assess?
Formulate operational plans and objectives to implement strategy; make operation decisions
What information do lower managers assess?
Implement operational plans and objections; make short-term decisions; transact day-to-day business operations
What are external information sources?
Websites
Newspapers
Conferences
New Employees
What are internal information sources?
Periodic financial reports
Performance reports
Sales reports
Who are stakeholders?
Individuals, groups and institutions that are directly or indirectly affected by the decision
Different stakeholders may provide input or be included in the decision making process
What is the impact of stakeholder input?
Decision making is done by individuals but the decision is influenced by a process of stakeholder input
What is a collectivist culture?
The benefits and interests of the group outweigh personal ones.
What is an individualist culture?
The benefits and interests of the individual outweigh those of the group
What are the 6 dimensions upon which cultures differ?
- Power Distance - the degree of inequality among people that is viewed as being equitable.
- Uncertainty avoidance - The extent to which people in a given culture prefer structured situations with clear rules over unstructured ones.
- Individualism
- Masculinity
- Long term orientation vs. short-term focus
- Indulgence - The extent to which people try to control their desires and impulses based on the way they were raised.
