HBM Unit 1 - Decision-Making

Decision-Making

A decision is a choice between alternatives.

Decision-making is the most important aspect of management. Effective decision-making is essential for successful business practice. Poor decisions can have negative effects on a business. An example of a shop which uses decision-making is Debenhams and how they display the stock in their shops.

Decision-making can be categorised into three different types:

• Strategic (Senior Management)
• Tactical (Senior/Middle Management)
• Operational (Supervisory/Bottom Management)

Strategic Decision-Making

Strategic Decisions:

• Affect the business in the long-term
• Set out the companies’ overall objectives
• Are made by Senior Management
• Are difficult to reverse once actioned
• Tend to lack specific detail (visionary)
• Are often proactive, to stay ahead of the competition

Examples of Strategic Decisions are:

• To increase market share by 20% within 10 years
• To maximise sales in the next financial year
• To have 100% customer satisfaction

Tactical Decision-Making

Tactical Decisions:

• Are made on a monthly/yearly basis (medium term)
• Are made by senior or middle management
• Are made to achieve the businesses strategic objectives
• Contain more focus and detail than strategic decisions

If Walkers strategic decision was to increase sales, then developing more product lines (varieties is a tactical decision.

Tesco needed to recruit more staff when it decided to offer bag packing services. This was to increase competitiveness against Sainsbury’s 24/7 open hours.

Operational Decision-Making

Operational Decisions:

• Are made on a daily/weekly basis (short-term)
• Are made by low level managers such as team managers or supervisors
• Are often reactive when a change occurs

Examples of Operational Decisions are:

• When an employee is ill and so the manager must reorganise the shift rota.
• When something breaks and so the repair service has to be phoned.

Type of Decision

Decisions are likely to be interconnected. For example, if the strategic decision is to increase profit, the tactical decision might be to find cheaper suppliers of raw materials. Finally, the operational decision might be to decide when to pay suppliers to achieve cash discounts for prompt payment.

Role of the Manager

Henri Fayol specified five functions of management:

• Plans
• Organises
• Commands
• Co-ordinates
• Controls

There are now seven specified functions of management:

• Planning (e.g – setting staff targets, setting objectives)
• Organising (e.g – arranging the resources of the organisation to be there when people need them and acquiring additional resources if required)
• Commanding (e.g – issuing of instructions to subordinates, showing leadership)
• Co-ordinating (e.g – making sure staff and resources like raw materials are in the right place at the right time)
• Controlling (e.g – ensuring plans are on target and within budget, monitoring the quality of work, ensuring decisions are reviewed to…