decision making process

All posts tagged decision making process

The Decision Making Process

Published February 6, 2015 by Mayrbear's Lair

decision-making

(Reposted from May 15, 2013)

Introduction

Decision making is an essential part of entrepreneurship that affects numerous elements in operating a business. It is in an entrepreneur’s best interests to possess the skills to help them reach the best decisions available to insure the soundest opportunity for success. Low (2010) contends entrepreneurs play an important role in the economy with three major components that affect their decision making process: (a) the vision and operation of the venture; (b) the uncertainty and risks they confront; and (c) the innovation process or reallocation of resources (Low, 2010, p. 5). In addition, incorporating the necessary business acumen can: 1) influence political agendas; 2) help avoid violation of legal and regulatory issues that can yield outcomes with extreme consequences; 3) play an important role in cultural perceptions; 4) influence the demographic diversity of an industry; and 5) have a huge impact on the financial resources that affects the operation of a business.

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Demographic Diversity

A proprietor’s decision making process can also effect the demographic diversity of an organization. For example, when Virgin Company’s entrepreneurial giant, Sir Richard Branson (2012) was contemplating whether Virgin branch out to launch a new airline, he was advised to avoid certain competitors due to costs and for fear of going up against industry giants. He realized he was up against goliaths with sizable fleets, experienced staff, and strengths from holding huge portions of market share.  Branson’s intuition however, and personal grievances from traveling, kept focused on competitor complacency. He was passionate about creating a better flying experience and knew others felt the same.  With this energy and tunnel vision, Virgin Atlantic was introduced and made their mark in history (Branson, 2012).

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Legal and Regulatory Issues

Each year the US Supreme Court issues actions that constitute new litigation due to failed businesses because of gaps in legal insight in the decision-making process by leaders (Bardwell, 2009). For example, during my employment at Capitol Records, the organization expanded into the music video production market and created a new division called Picture Music International (PMI). This event constituted the rearrangement of senior executives in key positions who were disbursed in helm positions within the structural organization. The changes occurred quickly in an attempt to create a smooth transition while maintaining operations. As a result, important components were overlooked and errors were made due to communication barriers from the rapid transit.  In the process, a contractual renewal date for an important artist went undetected. The new senior executive did not negotiate the original contract and was therefore not cognizant of the issue. The artist’s legal representatives allowed the contract to expire and the artist signed to a competitive label. Because of the gap in legal insight, the oversight resulted in the forfeiture of a major industry player, and in the eyes of the shareholders, perceived as an embarrassing loss.

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Political Agendas and Cultural Perceptions

Steyaert (2000) purports the role of entrepreneurship in the modern era is far larger than previously considered and is closely involved with economics.  Entrepreneurship is viewed as an economic phenomenon, with innovative power that extends beyond its own economic ambitions and requires the examination of its political and ethical effects (Steyaert, 2000). For example, when a firm is exposed for polluting, activists use this opportunity to pursue political agendas.  In the meantime, scholars explore factors that determine how entrepreneurs help economies grow as a result of psychological approaches to an enterprise (Thornton, Robeiro-Soriano, & Urbano, 2011). Take for example the culture Starbucks created. Prior to its genesis, Americans were used to having coffee in diners or restaurants for under a dollar.  Starbucks vision focused on drinking coffee as a reason to socialize. In doing so they created a culture where consumers are happy to pay premium prices to partake in the Starbucks experience. This culture translates into enormous profits and a worldwide phenomenon that includes a Starbuckian dialect.

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Financial Resources

Financial advisors understand that cash flow is also an important component business owners require to make sound financial decisions to ensure growth and survival. A company with solid liquidity is not only able to meet short term financial obligations, but also has accumulated enough equity to take advantage of alluring business strategies as they expand (Cory, Envick, & Patton, 2011). For example, with each success Capitol Records enjoyed from an extensive catalog that includes the Beatles, Neil Diamond, Tina Turner, David Bowie and Kenny Rogers, UK based parent company, Thorn-EMI continued to incur huge revenues that allowed them to expand into other fields. However, for every successful venture, there are also ventures that fail and become corporate tax write-offs. In this aspect, the decision making process can result in failure and loss of revenue.

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Conclusion

Sir Richard offers the following tips that have helped in his decision making: (a) trust your instincts, (b) focus on your customers, not your critics, (c) always support your team, and (d) know when to say goodbye (Branson, 2012). In conclusion, the most important reason decision making is an essential skill for entrepreneurship, is that a wrong choice can become the game changer that makes or breaks an organization.

That’s a wrap for this week! Until next time … Keep organizing your systems!

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Most of us are going through life without interrogating whether our decision-making processes are fit for purpose. And that’s something we need to change – especially when the stakes are high and the decisions are of real import. – Noreena Hertz

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For more information on Media Magic’s digital publications, or to purchase any of our Business Life titles, please visit amazon.com’s new feature called “Author Central” to view:

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References

Bardwell, S. (2009, January 1). Legal insight decision making for small business and entrepreneurs: A judicious approach. Retrieved February 28, 2013, from Freepatentsonline: http://www.freepatentsonline.com/article/Entrepreneurial-Executive/219010996.html

Branson, R. (2012, February 7). Richard Branson on decision-making for entrepreneurs. Retrieved February 28, 2013, from Entrepreneur.com: http://www.entrepreneur.com/article/222739

Cory, S., Envick, B., & Patton, E. (2011, January 1). Sound financial decision making for entrepreneurs: can the GAAP cash flow statement mislead? Entrepreneurial executive. US: The DreamCatchers Group, LLC. Retrieved February 28, 2013, from http://www.freepatentsonline.com/article/Entrepreneurial-Executive/263157521.html

Low, S. (2010). Defining and measuring entrepreneurship for regional research: A new approach. ProQuest dissertations and theses; 2009; ProQuest entrepreneurship. Urbana, IL, USA: ProQuest LLC. Retrieved February 28, 2013

Steyaert, C. (2000, June 18). Creating worlds: Political agendas of entrepreneurship. Nordic conference on small business research. Aarhus, Denmark: ProQuest, LLC. Retrieved February 28 2013, 2013

Thornton, P., Robeiro-Soriano, D., & Urbano, D. (2011). Socio-cultural factors and entrepreneurial activity: An overview. International small business journal. Barcelona, Spain: Sage. Retrieved February 28, 2013

ETHICAL THEORIES

Published December 10, 2014 by Mayrbear's Lair

ethics

Many people have different views about what it means to be ethical. In my book, Ethics in the Real World (2013) my research revealed that although individuals may have similar perspectives on culture and spiritual beliefs, they can still express a variety of interpretations of what being ethical means (Berry, 2013). Ethical theories can help individuals decide what is morally right. In addition, the concepts of right and wrong behavior can also be determined by the group to which one belongs to. For example, Geisler (1989) suggests that ethics can be defined in terms of ethnics or what the community deems as morally right and therefore each society is responsible for creating its own ethical standard. Similarities that exist between different social groups for instance, result from common needs and desires rather than universal moral prescriptions (Geisler, 1989).

In a business environment, however, leaders must rely on their own views of morality and ethics to assist them in the decision making process. Although there are times when a leader is confronted with making a decision and is required to determine whether it is more important for the organization to engage in ethical practices or unlawful ones, like the many lenders in the mortgage and loan industry that approved home loans for individuals who were not qualified. At the time, these practices were justified because of loopholes in the legal system. With respect to the mortgage and loan crisis, executives acted under the notion that their conduct was well within the parameters of the legal framework, and skirted past the ethics issue.

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Leaders who find themselves in sticky situations like that, where they are confronted with challenges that require they make unlawful choices, can look to a variety of philosophical theories to help them make the most effective decision that will benefit the organization and their stakeholders without violating any policies. Seaquist (2012) outlines the following philosophical theories that help guide the decision makers: (a) ethical absolutism, religious fundamentalism, utilitarianism, deontology, ethical relativism, Nihilism, virtue and justice ethics (Seaquist, 2012). For example, if a leader in the mortgage and loan industry relied on the religious fundamentalism of Christianity, the executive would look to God’s will as to what is right or wrong to help guide their actions. This philosophical style is similar to the ethical absolutism, in that right and wrong concepts are absolute and do not change.

Religious fundamentalism relies on the doctrines of truths laid out by the prophets and interpreted from Biblical scriptures. In this respect, an executive’s views are defined on a Christian’s perspective of ethics based on God’s will, which is absolute. From this philosophical view, an executive may choose to assist families that are at a disadvantage for making a first time home purchase, and engage in business practices they deem lawful, even though it may be considered unethical. In this respect, as a Christian, the individual’s choice is to find a way to help others first which in God’s eyes is good, even though the behavior, in the eyes of the financial institution they represent may consider it unethical.

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A leader, on the other hand, that draws conclusions from a philosophy that embraces ethical relativism, rejects the concept of absolute moral values. These leaders do not conform to ideas that moral judgments are finite. Huemer (2005) postulates, that ethical naturalism and intuition also play a role that can influence individuals. Ethical naturalism for instance holds the view that right and wrong can be identified by whatever promotes human welfare and happiness. Ethical intuitionism, on the other hand, refers to a philosophy that some things (actions, states of affair, etc.) independently consist of one’s attitudes towards various situations (Huemer, 2005). This view embraces an attitude that at least some moral truths are known intuitively and subject to individual interpretation. In other words it is generally understood that some moral truths are known directly and not through the perception of a person’s five senses, or based of other truths. Like the ethical relativism philosophy, they deny the existence of absolute moral principles.

Leaders that conform to this kind of philosophy are focused on following the parameters of the laws and although are concerned with ethical values, do not place it as a priority in the decision making process. For example, an executive that embraces this philosophy may approve a loan to the tobacco industry to make a huge profit for the organization, even though it may be deemed unethical to support an industry that for many years masked the harmful effects of their products. In conclusion, leaders must decide for themselves the kind of leadership style they intend to embrace and how to run their business efficiently. Hanh (2012) reminds us that business leaders do not have to sacrifice happiness or their values, to make a profit (Hanh, 2012). Business leaders that cultivate an ethical climate will automatically operate their organization within the framework of the law and incorporate this attitude into their codes of conduct. This is an effective leadership strategy that is more likely to ensure an organization’s long term success.

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Democracy must be built through open societies that share information. When there is information, there is enlightenment. When there is debate, there are solutions. When there is no sharing of power, no rule of law, no accountability, there is abuse, corruption, subjugation and indignation. – Atifete Jahjaga

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2 organizational management business skills publications nov 2014

For more information on Media Magic’s digital publications, or to purchase any of our Business Life titles, please visit amazon.com’s new feature called “Author Central” to view:

Mayr’s author page

References:

Geisler, N. (1989). Christian ethics. Grand Rapids, MI: Baker Publishing Group.

Hanh, T. (2012). Work: How to find joy and meaning in each hour of the day. Berkeley, CA: Parallax Press.

Huemer, M. (2005). Ethical intuitionism. New York, NY: Palgrave MacMillan.

Seaquist, G. (2012). Business law for managers. San Diego, CA: Bridgepoint Education, Inc.

 

Asking the Right Questions

Published September 22, 2014 by Mayrbear's Lair

questions

Asking the right questions is an important component in the strategic decision making process.  In my ebook, The Value of Corporate Strategic Management (2014) I provided insights to effective leadership skills and examine more closely strategies that top performers implement to manage an organization more efficiently (Berry, 2014). For example, to help them devise the most effective strategic plans, leaders contemplate some of the following common questions that might be useful in the planning process:

  • How can we do that (don’t ask “Why can’t we do that?”)?
  • How else can we do that?  What else could we do?
  • Will you help me? What else could we do?
  • Who, what, why, where, when, and how much?
  • Who will do what and by when?

Conducting an analysis is important because it helps determine whether the functioning processes of an organization are operating efficiently. Ivey (2013) explains that by asking the right questions, managers can help identify root causes that affect employee outcomes. For example, are the issues that staff members face based on cultural or generational factors? Determining the answer can provide insights on how employees interact with one another (Ivey, 2013). In other words, by conducting an analysis, leaders are in a better position to diagnose a problem. The first step in this process is to gather information to determine the challenges as a means to better comprehend concerns and identify potential opportunities or threats. Asking the right question is a significant skill that can be extremely helpful in conducting an analysis because it gives the decision makers the opportunity to discuss their concerns and develop a collaborative effort on how to devise effective strategies to improve performances and outcomes.

questioning

Asking questions like, “How can we do that?” or “How else can we do that?” are excellent questions to begin the process, however, as these kinds of questions are more general, they do not address specific topics like whether supervisors are achieving their goals or whether employees are engaged in high performances. In their book, Corporate Internal Investigations, Kramer and Lomas (2013) suggest that it is important for leaders to begin the internal analysis process by devising one single point of management control to prevent output chaos or derive at conclusions that are not reliable or credible. In addition, the analysis process should include a strong commitment from the highest level in the organization, supported by the appropriate authorities and provide terms that are plain and concise. This can serve to help dissuade any possibility of misconduct or undermining the investigation process (Kramer & Lomas, 2013).  These components can serve to help establish the integrity of the analysis process. In addition, conducting an organizational analysis can cause staffers anxiety where they become fearful of losing their jobs so, it should be managed in a way that does not interfere with daily operations or create an atmosphere of distress.

On Wednesday, we will take a closer look at how organizational analyses are used as a strategy to identify a company’s strengths and weaknesses. Until then … stay organized!

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Strategy must have continuity. It can’t be constantly reinvented. – Michael Porter

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For more information on Media Magic, our digital publications, or to purchase any of our accelerated learning Business Life titles, please visit our website at:

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References:

Berry, M. A. (2014). The Value of Strategic Management. USA: Amazon Digital Services, Inc.

Ivey, N. (2013). How to conduct internal investigations. Boca Raton, FL: CreateSpace Publishing.

Kramer, D., & Lomas, P. (2013). Corporate internal investigations (2nd ed.). Croydon, England, Great Britain: CPI Group (UK) Ltd.