Business & Commercial Aw a r e n e s s

6BUS0279

Lecture 5: Decision Making 1 Qualitative

j.a.g.willard@herts.ac.uk
3BUS0279

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

3BUS0279

Decisions
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

3BUS0279 3

Decision Types
Qualitative Quantitative

Reactive

Proactive

Strategic

Tactical

Operational

Null
3BUS0279 4

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 & attitudes Assessments of likely behaviours Organisational politics People related factors Some analytical techniques Different decisions are likely despite the same inputs Based on judgment or subjectivity
3BUS0279 5

Numerical inputs eg: Market research Forecasts Historical data Data related factors Many analytical techniques Repeatable, consistent Objective as they are based on certainty or probability

Reactive

Proactive

Proactive decisions are preferable but not always possible Successful businesses make more proactive than reactive decisions A decision made after an event 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 technology Takeovers and mergers Expansion into new markets

Event could be internal or external to the business, eg: Competitor activity Legal change Technological advance Change in consumer preferences Machinery breakdown Labour strike
Events may be foreseeable Impact of decision is later identify change analyse decide
3BUS0279

Always involve anticipation

Greater risk and hence may fail Impact of decision is earlier spot opportunityanalysedecide
6

Strategic

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:

Tactical

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 preprepared food that they cook or reheat

Operational

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

3BUS0279

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 needed 2. Lack of resource or skill to analyse the situation 3. 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
3BUS0279 8

Making Qualitative Decisions

MCDA eg Solution Matrix (see the last and the next lecture for more on this) Group decision 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 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

Generally decreasing accuracy

y y y

Subjective unbiased 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 Individual decision maker or a key influencers 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
3BUS0279 9

Subjective biased decision

POLITICAL DECISIONS
Decisions 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 *

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 facts So, 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 it The result is a political decision and A decision not in the best interests of the business
* Encarta Dictionary
3BUS0279 10

Reasons behind political decisions

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

Driver Fear of the correct decision

Self-advancement / role protection Avoidance of work or responsibility

Possible Counter
Discuss reasons for fear with the decision maker and explore ways to counter these fears or reasons for them Alert other decision makers/influencers and suggest they act. Care as this is whistle blowing role protection can be a fear 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
Business sabotage/vendetta Competitor inspired activity

Alert other managers, try to understand the causes and look for ways to reduce conflict. Role changes may be needed
Inform top management. This may result in legal action, so be careful: investigate thoroughly, get evidence, look for allies Inform top management. This may result in legal action, so be careful: investigate thoroughly, get evidence, look for allies
3BUS0279 11

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
3BUS0279 12

An agenda is a list of possible general

outcomes which are open for discussion

Open
Some hidden agenda outcomes may be brought to the surface if they are openly discussed by others . . . . .

Hidden but potentially discussable

. . . .or if the hidden agenda holder can be persuaded to discuss them ie: to unhide them

Deeply Hidden
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
3BUS0279 13

Why do hidden agendas exist?

Desire of the outcome but no wish to be associated with it
HR Director favours a redundancy programme but wants to appear as a champion of the workforce

Feelings that their open support could prevent its adoption

CEO known to want the HQ to move from London to NY, hides support for acquisition of a large NY based competitor

Reasons
And Examples

Personal hidden dislike / vendetta against a key agenda supporter

Manager who lost out in promotion race tries to railroad an important business initiative championed by their rival
3BUS0279

Personal reasons which have no business basis

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
14

Handling hidden agendas

Can you Identify them?

Raise with the agenda holder

Identify motives and agenda holders

Rumours, hearsay, gossip

Beware of multiple agenda holders

Build a joint attack with others

Identify

Counter

Look for behavioural evidence

Talk to colleagues and contacts

Assess how the holder will fight back

Raise the agenda topic yourself

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
3BUS0279 15

Summary
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 decisions

1.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
3BUS0279 16