Judgement in Managerial Decision Making - Case Study Example

Executive Summary Since its humble beginnings, the Natural Beauty Shop has consistently grown to what it is owing to its strong organizational culture, superior quality products and superior customer service. It is due to this growth that the founder and the CEO Maggie thought it wise to expand the company’s operations into the UK. This necessitated the appointment of an MD who would run the company in her absentia. However, the new CEO adopted bad policies and bad management policies that have brought the company down to what it is now. As such, Maggie has consulted our firm within an aim of getting recommendations as to how the situation at the company can be turned around. As such, this report gives a detailed account of the problems bedeviling the company and suggests multiple solutions that could be adopted to turn the company around. The report then gives specific recommendations that the CEO should implement with the immediate effect so as to turn the company around. Finally, the report gives an implementation schedule that the firm recommends the CEO should follow in a bid to promptly addressing the problems at the company to prevent its downfall. Table of Contents Executive Summary 1 Problem identification and analysis 3 Statement of major problems 5 Generation and evaluation of a range of alternative solutions 6 Recommendations 10 Implementation 11 Problem identification and analysis Since the departure of Maggie to establish the UK operation and the coming in of Tony as the managing director, the natural beauty shop has never been the same again. A number of issues have cropped up which now threaten the existence of the Natural Beauty shop. The issues are mainly associated with the inexperience of the managing director and his arrogance that have resulted in his making changes that have acted to the detriment of the company. The problems bedeviling the company include the following; i) The problems at the natural beauty shop could be attributed to the fact that Maggie leaves a new CEO with no experience and heads to UK for a long time and hence she is not in to guide him on what to do. In other words, the handing over is improperly done (Bazerman and Moore, 2017). ii) The new CEO Tony Smith lack of experience in the company’s operating industry as he has never worked in the industry. This means that the changes that he makes are not good for the company. iii) Tony’s one man show and arrogance and hence failure to consult when making changes and hence he makes changes that although are aimed at cost reduction end up hurting the company. iv) Tony’s failure to understand the company’s culture meaning he does not understand why things are done the way they are done. As such, the changes he makes end up ruining the organizational cultural at the Natural Beauty Shop (Brown, Taylor, 2015). v) Demotivated employees- the changes by the new CEO leave the employees demotivated since for instance their allowances are removed while experience is no longer important in hiring. There is no internal hiring and promotion meaning there is no longer motivation for employees and hence this has greatly affected their commitment and hence productivity. vi) Lack of career development and training- the removal of career development pathways program has had a detrimental effect on their production. Tony has also removed all non-product and non-software related training in a bid to reduce costs. Furthermore, the introduction of official warnings to employees who fail to meet their performance targets as opposed to previously rewarding those who meet their targets also greatly affect performance and efficiency. vii) The customer service has greatly declined with the business now concentrating more on business hence reducing face to face time customer spent with sales staff. Furthermore, there are now only few sales staff who serve customers meaning customer service is poor while customer grievances are no longer listened to neither are their tastes and preferences adhered to any longer viii) The creating the post of Director of Supply Chain Management and hiring Wallace to the post. Wallace disregards company culture and hence policies on supply’s which leads to the company manufacturing and selling products of very low quality. The unethical and sneaky supply policies mean disappointed customers and hence lower sales. ix) Lack of harmony between the employees and the new managing director who is arrogant and never listening to anyone. x) Bad publicity created by both customers and employees in their bid to air their grievances through the conventional media and the social media meaning that existing and new customers will shun the company’s products. Statement of major problems Arising from the above problem identification and analysis, the following major problems have been identified; i) Management – Actually, all the problems bedeviling the company can be traced to the new MD. It seems that the handing over was not properly done as his actions do not seem to advance the company’s culture. It seems he does not understand what is expected of him and he seems to only concentrate on cost cutting measures at the expense of the overall company performance (Hawthorne, 2017). His leadership style is also does not favor modern organizations as he is arrogant, never listening and never consulting any one. It is a one man show and his word seems to be final. He simply knows nothing about the company’s culture. ii) Motivation of employees- The employees are demotivated with a dictator MD who never listens to them. Their motivating allowances have been removed while the training and development opportunities are no more. The company’s culture which they treasure and is partly the reason for their being at the natural beauty shop has been trashed. As a result, the employee turnover is now at 60% in a company that has never experienced employee turnover. Their efficiency and performance is hence wanting. As such, this is part of the reason why product quality and customer service is now wanting. Consequently, this has led to bad publicity as they try to air their grievances. If the problem with the employees is addressed, the problem at the natural beauty shop will be almost over. iii) Product quality and customer service – the quality of products has greatly deteriorated owing to the fact that the company’s policy on supplies is no longer adhered to. The ingredients are no longer sourced from the poor communities of Africa and Latin America. Furthermore, the new suppliers no longer observe quality specifications resulting in poor quality ingredients and hence products. Furthermore, owing to the employees being demotivated, the customer service has greatly deteriorated (Harigopal, 2006) .This coupled with the poor quality of products has resulted in sales greatly declining. Furthermore, this has also led to bad publicity meaning existing and potential customers are now shying away from buying the company’s products. Generation and evaluation of a range of alternative solutions The following are the alternative solutions to the problems identified above; Problem 1: Management Alternative 1: Abandoning the UK expansion plan altogether. By abandoning the UK expansion plan, Maggie will go back to Australia and concentrate on the business hence bringing it back to its former performance levels. Advantages: Maggie will be back reinstate the company culture, restore employees training and motivation programs, restore the company’s supply chain management policy and hence bring the company back to its former state (Goodwin and Wright, 2014). A new expansion plan such as franchising or establishing a joint venture that does not need Maggie to be away for long will be adopted The company will be profitable again Maggie will be able to groom existing managers to take an MD role as she plans for future expansion. This is important as such an MD would understand what is expected of him in terms of company culture, mission and vision. Disadvantages This will halt the company’s expansion plans and hence potential to improve earning potential The investment already made in UK will be lost Alternative 2: Halting expansion plan temporarily and Retraining the new MD on company culture, mission and vision Maggie should temporarily return to Australia in a bid to ensure that Tony understands what is expected of him. This will involve retraining Tony on the company culture, mission and vision and ensuring he knows and understands what is expected of him and setting rules of what he can or cannot do without consultation. Advantage -the expansion plan will not be shelved for good -it will ensure Tony manages the company in line with the company culture, mission and vision and hence bring it back to former performance (Waren, 2011). -No substantial costs will be involved -the company will be sure to return to profitability Disadvantages -The UK expansion plan will be temporarily halted and hence the company will loose the customers it already has -Tony might not be willing to change his management style Alternative 3: Firing Tony and hiring another MD Tony should be fired as it is clear he does not understand how the industry operates or what is expected of him. He is arrogant and a dictator. He doesn’t care to listen and hence things are getting worse despite the warnings from managers and employees. Thus, looking for a new MD probably from within the company would be better. Advantages -The poor trend the company is now in will be halted permanently -There are no significant fees involved apart from the recruitment fees -The UK expansion plan will go on as planned -The new CEO will be in a better position to run the company as he understands the company culture, mission and vision Problem 2: Motivation of employees i) Reinstate all performance based pays and training and development programs previously abolished Advantages -it will motivate employees to be more productive and efficient -No additional costs will be incurred -Employees will feel part of the company and hence work harder Disadvantages -this is not in line with the cost cutting policy the new MD has adopted meaning no funds might be available for expansion ii) Increase their salaries So that employees don’t feel that they have lost all by taking their allowances away, the company should consider a salary raise for everyone and the savings realized from slashing the allowances be used in the expansion. Advantages -It will motivate employees to work harder if increase pegged on performance -savings will be realized and used in the expansion program Disadvantages -it will still involve costs iii) Talk to and Listen to them and incorporate their views in corporate decisions The changes that have demotivated employees have happened without their knowledge. They need to understand why their allowances have been taken away. They also need to be listened to and their grievances addressed (Tompkins, 2009). They need to feel part of the company. Advantages: -No significant cost implications -Employees will feel appreciated and hence be motivated to be more productive and efficient Disadvantages -The strategy might not work especially with the current MD Problem 3: Product quality and employee motivation i) Firing the supply chain director and reinstating company culture on supplies The new supply chain director has trashed all the company policies on supplies and hence he is to blame for the deteriorating quality of products. As such, he should be fired. Advantages -This will ensure the company reverts to the old policy of sourcing high quality supplies and hence produce high quality products -it will lead to cost reduction since the post is not necessary as it has led to lower quality production -High quality products will restore customer confidence in the company Disadvantage -Resources used in recruiting the director will have been lost ii) Hiring more customer service employees One of the course of poor customer service is lack of enough employees. As such, the company needs to hire more customer service employees and increase customer contact so as to improve customer service. Advantages -the strategy will lead to improved customer service (Kumar and Burges, 2004). Disadvantages -cost implications Recommendations Based on the contingency theory, the management should not be rigid but their act should be guided by the situation at hand. On the other hand, theory X and Y requires the management to understand their type of employees and hence treat them accordingly. This is what is lacking at the natural beauty shop and hence the following recommendations are made; i) Immediately sack the new MD and replace him with an MD from within the company- Tony is the major cause of the problems bedeviling the company. He is arrogant and does not care to listen. His is a one man show and hence sacking him will see all other problems resolve (Blenko et al. 2010). This strategy is good since it does not involve a lot of cost while hiring a new MD from within will ensure that he knows and understands the company’s culture, mission and vision. As such, he/she will be in a better position to manage the company in Maggie’s absence and still ensure it continues to perform well. On the other hand, the expansion plan will not be halted. ii) Reinstate all performance based pays and training and development programs previously abolished. This will ensure the employees are motivated and hence more productive and efficient. Motivating the employees will ensure the company offers the best quality of service and hence the problem of poor customer service will be resolved and consequently the company’s good name will be restored. iii) Firing the new supply chain director (Turan, 2015). This is important since he has done away with all procurement rules and this has resulted in poor quality products and hence poor customer services. As such, firing him would allow the company ensure high quality products are produced and restore the company reputation given the damage poor production has caused. Implementation The following is the recommendation schedule that we propose that Maggie (CEO) should adopt to deal with the problems at the Natural Beauty Shop. WHO WHAT WHEN AND WHERE COST CEO and MD Hold meeting with Tony (MD) so that she is briefed on the company’s performance during her absentia The meeting to be held at the company’s board room on 15th April 2017 No significant costs CEO and MD CEO to hold meeting with the CEO to establish the rationale of the changes effected during her absence while getting explanations on the poor performance and the poor image portrayed by the media. In conjunction with the HR department gives reasons for dismissal and issues termination letter in line with the law. Meeting to be held on 15th April at the company’s board room No significant costs apart from statutory dismissal costs CEO and supply chain director CEO holds meeting with the director and seeks reasons for disregarding organizational supply policy. explains reason for dismissal and issues termination letter Meeting to be held in corporate board room on 17th April 2017 Statutory dismissal costs to apply CEO and Departmental managers Maggie and departmental managers discuss supplies. Maggie notifies new suppliers not meeting company policies of discontinuation of supply contracts with the company. Notifies old suppliers to resume supply Meeting held in corporate boardroom on 18th April 2017 Seek legal advice on any costs that might arise CEO and departmental managers Maggie and departmental managers discuss sales and customer services. Maggie issues statement to customers apologizing for poor services and notifies them that appropriate actions have been taken to restore high quality of products and customer services (Pulakos, 2009). Meeting held in corporate boardroom on 19th April 2017 Advertisement costs will apply CEO and departmental managers Maggie and departmental managers to discuss employees’ plight. To hold meeting with employees and apologize for the previous happenings , assure them that appropriate actions have been taken to return the company to normalcy and seek for their continued support for the company while assuring them that their grievances are being looked at. Meeting held in corporate boardroom on 20th April 2017 No cost implications apart from those related to reinstating allowances and training and development opportunities CEO Maggie to interview potential departmental heads for the position of MD and subsequently appoint one. Discuss performance expectations and do a proper handing over to ensure smooth running of the company in her absentia. Interviewing to take place in the corporate boardroom on 21st April 2017 No cost implications apart from interviewing fee to external recruitment body CEO Engage the consulting firm to study the current company structure, mission, vision and company culture and recommend changes if necessary to ensure better performance in future and to prevent repeat of such a happening (Burrow, 2008) At the CEO’s convenience Consultancy fees apply CEO Put in place a succession plan so that future MDs and senior managers are sourced from within. A process to take place at CEO’s convenience Dependent on the approach adopted References: Bazerman, H&, Moore, D2017, Judgement in managerial decision making, New York, John Willey & Sons. Brown, S&, Taylor, K2015, Employee trust and workplace performance, Journal of Economic Behaviour & Organization, vol. 116, pp. 361-378. Hawthorne, M2017, Management theories and concepts at the workplace, Retrieved on 17th April 2017, from; http://smallbusiness.chron.com/management-theories-concepts-workplace- 17693.html Harigopal, K2006, Management of organizational change: Leveraging transformation, Hyderabad, India, Sage Publications. Goodwin, P&, Wright, G2014, Decision analysis for management judgement, New York, John Willey & Sons. Waren, D2011, The centennial of Fredrick W. Tailor’s The principles of Scientific Management: A Retrospective Commentary, Journal of Business and Management, vol. 17, no. 1, pp. 11-22. Kumar, S&, Burges, T2004, Managing performance and productivity for organizational competitiveness, International Journal of Productivity and Performance Management, vol. 65, no. 6, pp. 12-25. Blenko, W, Mankins, M&, Rogers, P2010, The decision driven organization, Retrieved on 17th April 2017, from; https://hbr.org/2010/06/the-decision-driven-organization Turan, H2015, Taylor’s scientific management principles, Journal of Economics , Business and Management, vol. 3, no. 11, pp. 1-4. Pulakos, E2009, Performance management: A new approach for driving business results, London, Rutledge. Burrow, J2008, Business principles and management, Oxford, Oxford University Press. Tompkins, T2009, Management and organizational behavior, London, Rutledge. Read More