Factors That Influence Managerial Decisions - Coursework Example

Name: Task: Tutor: Date: Management decision making Introduction Browns Insurance Service Company offers various services to their customers at affordable prices. The company is a market leader in their market segment though they face competition in their call centre in North East England because the competitors are using advanced technology than that of Browns Insurance Service Company. The CEO, Mr Sebastian Green, believe that the main caused of their poor performances was due to inadequate decision which was made by board which was selected to make decision of the company. Background Browns Insurance Service is a reputable company registered to offer financial services to it customers. The company has opened many branches in different countries so that they can be in a position to serve a wider market. However, the company has faced multiple problems. Some of these problems comprise of high competition in the market, poor decision making within the company and poor management criteria used in the company. According to the report from the CEO, Mr Sebastian Green, the company has lost a huge amount of money which was spend in launching new technology at their call centre in North East England. The CEO blames the board for making poor decision which caused every plan to fail. Description of the problem The company had waste a lot of money by purchasing technological equipment which failed to support the activities undertaken in the call centre. This force the company to spend more money and purchase the appropriate machines which will rectifies the problem. The CEO tends to blame the board for making in appropriate decision which has cost the company a lot of many to rectify it (Thierauf, 2008. pp 59) According to the Mr Sebastian Green, who is the CEO of the company, he believes that the problem had arisen due to the groupthink during the time of making decision of the company. Groupthink can be defined as concept which leads to making poor decision regarding the issues or the objectives of the company. From the scenario given it seems that the members try to reach a consensus by minimizing conflicts which they have without evaluating, critically testing or analyzing their ideas first. Due to this and in many instances therefore, groupthink causes problems in an organization because it leads to poor or no consideration on the appropriate technology which will solve the problem completely. Groupthink can therefore be a nuisance to the decision making process as is evident in the case of Browns Insurance Service Company where technological equipment which was expensively purchased failed to support the activities undertaken in the call centre. One symptom of groupthink which caused the problems in Browns Insurance Service was the failure of the technological devises to solve the problem as was anticipated before. This implied that everyone in the group had used his common sense when coming up with decisions. Through that situation however, the board was misled and thus the problem of purchasing wrong equipment which could not solve the problem came into being. Another symptom was the time taken to reach such an important decision. Mr Sebastian Green-the CEO of the company said that the decision was made over the weekend in conference centre where some of the members of the group were considered with stereotypes of by-product or out-groups of loyalty groups. According to some of the psychologist such as Thierauf (2008) they believe that common problems which arises during the time of making decision especially the group decision is the common phrase ‘we versus them’. This phrase has become common in most organization and it is likely that the phrase was central aspect in the Browns Insurance Service Company. This however caused a lot of losses in the Browns Insurance Service Company in terms of resources and time. This might had happen because members were afraid to express their own feelings and doubts concerning the decision which was made (Thierauf, 2008. pp 60) Another problem which hindered groupthink in the decision making process for Browns Insurance Service company was the so called process of mind guards i.e. those who protected others in the group from expressing their thoughts and ideas freely. The main aims and objective of this report is to provide effective decision making process which the company should adopt in order to achieve the company’s goals. Besides, the report will highlight the approaches used to make a sound decision in the company. This report will also provide effective ways or means of achieving the leadership position of the company in the market. The report will act as a guideline on what should be done in order to achieve the expected goals of the company. Literature review on group decision making Various literature reviews has defined decision making in different ways. some literatures believe that efficient decision-making comprise of important steps that need considerations of important information at varying stages of the process, and also the process which will offer the feedback on the same. In general, there are limited studies which cover decision making in core vs. non-core technology. Most literature reviews emphasized on the decision criteria which act as a guide for the decision making process. This report will explore the criteria that might have affected the decision made by the board of Browns Insurance Service Company which regards core technology as it recommended by strategic management theory and also behavioral economic theory. Strategic management theory This theory analyses the internal strength of a company and its resources which can be used to make decisions. This theory focuses on strategies which helps the company to maintain it competitive advantage. Such strategies comprises of maximizing the use of company’s resource and the available technology to meet the needs of the customers in the market. This theory is connected with various other theories such as core competent theory and resource-based view theory. Core competent theory According to Svenson (2009) the primary aim of making decisions concerning core vs. non-core technology aims at becoming stronger in terms of market share. He introduced this theory of core competence as a strategy which the company should used in order to attain competitive advantage and to analyze the company’s competitiveness as compared with other competitors in the market. The theory helps in identifying and measuring the core strength of the company. Ways of measuring core strengths includes accessing market with variety of customers of different buying behaviors, possibility of imitating or providing products like competitors does and measuring the benefit of having certain class of customers in the company. Other psychologist such as Taylor as seconded the fact that core competence is one of the useful strategies used by the managers in business environment to influence decision making process which concerns core vs. non-core technology. This theory gives the board the power to make decision which will decide whether the technology will be adopt or sold. Such decisions are key pillars in an organization which will decide the strength of an organization in the market. Furthermore, such decision will enable the managers and executives in the company to know the value of their customers so that they can concentrate on the customers which purchases 80% of the products sold by the company and also help to identify the weakness of the company. Resource-based review theory Both the core and non-core decision structure is commonly designed on the basis of the benefits which are obtained in the company. Most organization prefers resource-based view as a way of approaching contemporary strategic management in the company. This will be very essential for Browns Insurance Service Company because will leads to attaining competitive advantage of the company. The company is suppose to exploit its resources and capabilities in orders to obtain that competitiveness. Most companies face problems of limited resources while others are having non-substitutable resources. Some of these resources comprises of the brand names, knowledge and skills of using advance technology, skilled employees and capital. Advantages of resource-based view approach The main reason why most companies prefer this approach is because they believe that the approach is fit. They believe the approach to be fit since it will improve the internal strength of the company. This approach will help the company to create a culture in an organization whereby the organization’s resources are maximized to maintain competitive advantage in the company. Furthermore, this approach is used as a concept which is used to determine whether the latest technology falls under the core or non-core technology. It is for this reason that I could strongly advise the board of Browns Insurance Service Company to pigeonhole the technology into various categories. This can be done by choosing the appropriate technology basing on the size and the skills that is required. Besides, the available resources need to be considered so that decision can be reached on what kind of machines to be bought. This approach will also enable the company to decide on important issues such as training the employees on how to use the machines in the company. Secondly, the management of the company needs to not only identify the available resources and capabilities in the company but also identify potential resources and capabilities and maximize them (Fraedrich, 2009. p 148). The above advantages are in most cases not realized in the company because managers are not knowledgeable in technological sectors. The CEO of the Browns Insurance Service Company should arrange for the refresher courses for long serving managers. Technology is something which keeps on changing from time to time. It is therefore advisable for every company to update its employees especially the supervisors. Advantages of group decision making Group decision making has various characteristic which facilitate faster making of decisions in the company. Some of these characteristics include the ability of members to share common interest in a collective decision in the company. Furthermore, every member of group which is responsible in making decision is normally given an opportunity to air his or her views concerning the decision which are made. However, there are various advantages and disadvantages which are affecting the group decision making. Some of the advantages affecting the group decision making include the ability of pooling resources i.e. to access more information concerning an issue which is being debated. Group members are people with different profession background thus they have specialized knowledge on the issues affecting different department in the organization. Besides, the group will give various alternatives so that the board can choose the best alternative to be implemented by the company. The members of the group will choose the best decision and be voted to it by members. This will reduce the cases of making unsound decision in the company. The other advantage of group decision making is the involvement of many stakeholders who will help in endorsing the decision made. On the other hand, there are various disadvantages which are associated with the group decision making. Some of these disadvantages include time consumption since the decision will not be adopted until all the members agree on it. Secondly, there might be ambiguity in the roles played by the members of the group. A member can be given a role which is beyond his ability or the problem of inequality can rise whereby few members participate in contribution of ideas. This can make some members to feel as if they are not valued and thus discourage them. Some of the scientific managers have proposed various methods of improving group decision in which Browns Insurance Service Company should adopt. Some of these measures include brainstorming. This is very important as it will make the board to create various ways and also come up with superior ideas on how the company objectives will be achieved. Fraedrich (2009) had also proposed Delphi technique especially for the companies which are providing intangible services. Other psychologist such as McGregor believes on methods such as computer assisted decision making. This will help the board to reach their decision especially if they consider factors such as group decision support system, and other methods such as computer supported collaborative work. I would strongly suggest for the company to adopt the method of computer assisted decision making. The management of the company should buy the advanced computers with large number software packages available to be used in by the board for analyzing the decision made in the meeting. This software will be important for the group decision making though the board will have to vote for it. Voting for the passed decision is essential for the members to feel that democracy have been exercised (Fraedrich, 2009. p 148). There are various advantages which are connected with the use of assisted computer decision making. Some of these advantages are the possibility of analyzing the distributed mode in order to find out whether the decisions made are effective or not effective. Furthermore, the system will help in carrying out analysis for the complex values and conducting sensitive issues in the company. Finally, the method will help in facilitating the changes which deserves to be made in the company. Factors that influence managerial decisions There are several factors which are likely to influence the board members or the people who are responsible for making decision in the company. Some of these factors include the intellectual ability. In every group people tends to have different perception towards the problem been approached. The skills, knowledge and analyzing of problems differ from one person to another. The second important factor is the experiences of the members, the members who are participating in making decision should be experienced or should have undergo such a situation so that they can make sound decision. Other factors which are popular though not important when comes to making decision is the sentiments and values. It is believe that every manager in all organization has is own sentiments, values or believe. Some play safe by doing things in a normal manner while others are pragmatic in the way they tackle issues. These kinds of managers are in most cases practical when contributing ideas and alternatives towards solving a problem. Courage is another factor which the managers should posses in order to implement unpopular decision in the company. Managers who are not courage may fail to implement important decision because they might fear the reaction of members in the company. Lastly, the board members who are participating in the process of making decision should have high level of motivation and self confidence so as to make decision which they believe to be beneficial to the company. Decision Making Approaches Scientific managers, management writers, psychologist and theorists have proposed various approaches for making sound decisions in the companies. Traditionally, these approaches have been group into four main categories. They comprised of logical systems approach, contingency approach, and quantitative approach and qualitative approach. These groups of theorist from various fields believe that each of these categories has advantages and disadvantages. There has been no best way of choosing the best approach to making effective decision in the company. However, the managers have been able to find the best by weigh the disadvantages of the above approaches. For example qualitative approach seems to the best because it involves analysis of the problem in a detailed manner. It considers so many factors such as SWOT analysis of the company, business environment and the kind of the organizational structure which has been adopted by the company. On the other hand, the quantitative approach considers only the goals and objective of the company. Though this is very important, it is also important for the company to consider other parties which affect the company in one way or another. Contingency approach to decision making has been emphasized by key scientific managers such as Henri Fayol. This theorist believes that, in general sense, contingency approaches are a class of behavioral theory that contends the decision to be made effectively, there should be a leader in that group making the decision. He also believes that the decision is arrived at when there is a mutual agreement on the issues being discussed (Svenson, 2009. p 78). Other scientific managers have given four important ideas to be considered when making a decision. These ideas state that there is no universal or one best way to manage a group or a team which has been selected to make decision of the company. The second idea is that the effective decision will be reached only if the design of the company matches with the surrounding environment. Also effective decisions must be accepted by all the departments of an organization and should be relevant to the business on which the company has involved itself in. lastly, the decision made should be of high quality and generally accepted by the parties of the company. Recommendation In my own opinion, I would strongly advise the CEO of the company to train his board members who are participating on the process of making the decision of the company. Furthermore, he should consider including women in this board so that female employees in the company can feel represented and valued. There are issues which might be affecting women and can act as motivation to them and thus the manager should consider including women in the group which design the decision of the company. Other factors which should be considered when selecting the group are age. Mr Sebastian Green should ensure that all the age group of the employees is represented so that the decision reach should be fair to all employees and other parties associating with the company. Finally, the CEO should ensure that he establishes a constructive environment for successful decision making. He should consider doing the following. The first thing is to establish the objective. This is done by defining the primary goal of the company. Secondly, he should agree with the members on how to reach the decision in the company. This will also state whether the decision will be single based i.e. one person deciding or “member only”. Such techniques will enable the company to make effective decision. Other factors are involving the right people in the decision making process, allowing others to air their views and listening to them. This will discourage the groupthink in the process and it will encourage participation (Svenson, 2009. p 78). Conclusion In conclusion, the management of the company should ensure that the group decision making is composed of the right people who are well experienced on such important event which determines the company’s success. They should also consider the disadvantage of group decision making and the advantages. The company also needs to weigh all the approaches and choose the best which will leads to effective decision that will be beneficial to the company. The managers should also avoid the issues of assumption of some basic facts about the entire decision process which may later turn out to be a problem to the organization or individual business. For example, the company’s directors or the CEO has elected only men who are between the age of 45 and 55 years and leaving the rest of the categories. This might leads to the problem because the group can pass the decision basing on their interest and leaving the interest of women and youths in the company. Work Cited Thierauf, R. J. Group decision support systems for effective decision making. Quorum Books, 2008. 4th edn. Pp 59-63 Svenson, O. Decision making: cognitive models and explanations. Routledge 2009. 3rd edn. Pp 77-81 Fraedrich, J. Business Ethics 2009: Ethical Decision Making and Cases. Cengage Learning, 2009. 7th edn. Pp 144-149 Read More