ChapterChapter

5

Decision Makers and Decision Making

Who are the Decision Makers in Business?Who are the Decision Makers in Business?

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Stockholders - May vote on major decisions- Generally, involvement is limited

Board of Directors - Approves major strategic decisions- Oversees general direction of the business

Top Management - Makes major strategic decisionsMiddle Management - Implements top management decisions

- Makes decisions within area of responsibilityProfessional Staff - Makes decisions in area of expertiseFirst-Line Supervisors - Implements higher level decisions

- Make day-to-day operational decisionsNon-managerial Employees - Make decisions regarding performance

of their individual jobs

Stockholders - May vote on major decisions- Generally, involvement is limited

Board of Directors - Approves major strategic decisions- Oversees general direction of the business

Top Management - Makes major strategic decisionsMiddle Management - Implements top management decisions

- Makes decisions within area of responsibilityProfessional Staff - Makes decisions in area of expertiseFirst-Line Supervisors - Implements higher level decisions

- Make day-to-day operational decisionsNon-managerial Employees - Make decisions regarding performance

of their individual jobs

StockholdersStockholders

Are owners of a company Never take an active role in a company Buy & sell their stock Vote on major issues at the annual meeting Elect members of the board of directors Do not make decisions for the company

Are owners of a company Never take an active role in a company Buy & sell their stock Vote on major issues at the annual meeting Elect members of the board of directors Do not make decisions for the company

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The Board of DirectorsThe Board of Directors

Board of Directors: Individuals elected by stockholders to oversee the

management of the firm.

Inside Directors: Directors who are company employees.

Outside Directors: Directors who are not company employees.

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Roles of the Board:Roles of the Board:

Make decisions of strategic significance

Serve as the corporate conscience of the company

Ensure that the firm’s activities are legal and ethical

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Top ManagementTop Management

Top Management:

The officers of a business who make major decisions for the company and are responsible for the company’s performance.

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Top Management

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Chief Executive Officer (CEO)Individual responsible for the long-range,

strategic direction of the company.

Chief Operating Office (COO)Individual responsible for the company’s

internal day-to-day operations.

Chief Financial Officer (CFO):Individual responsible for the overall financial

health and strategy of a company.

Top Management

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Chief Information Officer (CIO)Individual in charge of policy relating to the gathering,

use, and storage of company information.

Vice President:A top manager who is responsible for

a specific area of the company.

Typical Top Management PositionsTypical Top Management Positions

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Board of DirectorsBoard of Directors

ChairBoard of Directors

ChairBoard of Directors

President

Vice PresidentProduction

Vice PresidentProduction

Vice PresidentMarketing

Vice PresidentMarketing

Vice PresidentResearch

Vice PresidentResearch

Vice PresidentHuman Resources

Vice PresidentHuman Resources

Vice PresidentFinance

Vice PresidentFinance

Vice PresidentInformationTechnology

Vice PresidentInformationTechnology

CEO

COO

CFO CIO

Other Levels of Management

Middle Managers: Managers below the vice

president down to just above first-line supervisors, responsible for broad policies into doable tasks.

Professional Staff: Employees that make

decisions within their area of specialty that assist others in doing their job.

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Other Levels of Management

First-Line Supervisors: The lowest level of

management, directly responsible for overseeing the work of production employees.

First-Line Supervisors: The lowest level of

management, directly responsible for overseeing the work of production employees.

Non-Managerial Employees: Employees in a business

who are actually involved in producing or selling products and providing services.

Non-Managerial Employees: Employees in a business

who are actually involved in producing or selling products and providing services.

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Teams are Empowered to Make Work-Related DecisionsTeams are Empowered to Make Work-Related Decisions

Advantages of Teams: Brings together talented people from various levels of

businesses. Breaks departmental barriers, allowing quicker

action. Promotes employee involvement and commitment. Provides excellent source of creativity and

commitment.

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Types of TeamsTypes of Teams

Self-Directed Work Team: A group of employees

who supervise their own work and are given broad discretion over the direction of their own work.

Self-Directed Work Team: A group of employees

who supervise their own work and are given broad discretion over the direction of their own work.

Cross-Functional Team: A group of employees

who are selected from various areas of the business and brought together to make a collective decision.

Cross-Functional Team: A group of employees

who are selected from various areas of the business and brought together to make a collective decision.

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Teams can exist at top and middle management, staff positions, and in non-managerial levels.Teams can be ongoing or appointed to solve

particular problems.

Teams can exist at top and middle management, staff positions, and in non-managerial levels.Teams can be ongoing or appointed to solve

particular problems.

Relationships between Positions and the Chain of CommandRelationships between Positions and the Chain of Command

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PresidentPresident

VP - MarketingVP - Marketing VP - FinanceVP - Finance VP - R&DVP - R&D

Manager, Basic ResearchManager, Basic Research Manager, Product DevelopmentManager, Product Development Manager, TestingManager, Testing

Administrative StaffAdministrative Staff

Human ResourcesHuman ResourcesClerical StaffClerical Staff

ScientistsScientists

EngineersEngineers MarketingMarketing

FinanceFinance

VP – Human ResourcesVP – Human Resources

Differences Between Large and Small BusinessesDifferences Between Large and Small Businesses

Large Businesses: More complex decision

making Many vice presidents VP’s with specific

responsibilities Top managers with

specific responsibility VPs perform specific duty Small % of workers are

non-managerial Deliberative decision

making

Large Businesses: More complex decision

making Many vice presidents VP’s with specific

responsibilities Top managers with

specific responsibility VPs perform specific duty Small % of workers are

non-managerial Deliberative decision

making

Small Businesses: Less complex decision

making One or few vice presidents VP with multiple

responsibilities Top managers with

multiple responsibilities VP performs staff duties Large % of workers are

non-managerial Faster decision making

Small Businesses: Less complex decision

making One or few vice presidents VP with multiple

responsibilities Top managers with

multiple responsibilities VP performs staff duties Large % of workers are

non-managerial Faster decision making

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Decision Makers in Not-for-Profit Organizations

In Small Non-Profits: Volunteer Board of

Directors Executive Director Paid staff secretary

In Small Non-Profits: Volunteer Board of

Directors Executive Director Paid staff secretary

In Large Non-Profits: President Full set of Vice

Presidents Paid Staff employees

In Large Non-Profits: President Full set of Vice

Presidents Paid Staff employees

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The Decision-Making ProcessThe Decision-Making Process

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Strategic Decisions – Decisions that have a major impact on the general direction of a firm.

Strategic Decisions – Decisions that have a major impact on the general direction of a firm.

• Have long range impact.• Require careful analysis of the firm and its environment.• Are often the result of a strategic planning process.• May involve millions of dollars.• Are designed to capture opportunities or offset weaknesses.• Involve top management, including board of directors.

• Have long range impact.• Require careful analysis of the firm and its environment.• Are often the result of a strategic planning process.• May involve millions of dollars.• Are designed to capture opportunities or offset weaknesses.• Involve top management, including board of directors.

Characteristics of Strategic DecisionsCharacteristics of Strategic Decisions

The Decision-Making Process The Decision-Making Process

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Operational Decisions – Decisions that affect the day-to-day actions of a business.

Operational Decisions – Decisions that affect the day-to-day actions of a business.

• May or may not involve a large amount of capital.• Deal within specific situations within an organization.• Are made by experienced managers in the area.• Often have standard operating procedures available to guide decisions.• Require less analysis than strategic decisions do.

• May or may not involve a large amount of capital.• Deal within specific situations within an organization.• Are made by experienced managers in the area.• Often have standard operating procedures available to guide decisions.• Require less analysis than strategic decisions do.

Characteristics of Operational DecisionsCharacteristics of Operational Decisions

The Decision-Making Process

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Problem Solving Decisions – Decision making aimed at correcting an adverse situation that has developed.

Problem Solving Decisions – Decision making aimed at correcting an adverse situation that has developed.

• Situation is a deviation from normal operations.• May be minor or of crisis proportions.• Often need quick decisions to find solutions acceptable to all involved.• There may be no easy solution.

• Situation is a deviation from normal operations.• May be minor or of crisis proportions.• Often need quick decisions to find solutions acceptable to all involved.• There may be no easy solution.

Characteristics of Problem-Solving DecisionsCharacteristics of Problem-Solving Decisions

A Basic Decision-Making ModelA Basic Decision-Making Model

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1. Define the decision issue.1. Define the decision issue.

2. Gather and analyze information about the issue and the people involved.

2. Gather and analyze information about the issue and the people involved.

3. Develop alternative solutions or strategies.3. Develop alternative solutions or strategies.

4. Evaluate and select the best alternative.4. Evaluate and select the best alternative.

5. Implement the solution.5. Implement the solution.

6. Evaluate the results.6. Evaluate the results.

A Model of Creative Decision Making

Creative Decision Making: The process of

developing new or different ways to solve problems or capture opportunities.

Creative Decision Making: The process of

developing new or different ways to solve problems or capture opportunities.

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Break out of the mold!!

Break out of the mold!!

Thinkoutside of the box!!

Thinkoutside of the box!!

Crisis Decision MakingCrisis Decision Making

Characteristics of Crisis Situations: A short time-frame exists.

The situation is often highly visible.

The decision has significant consequences

Some risk of survival is at stake.

Characteristics of Crisis Situations: A short time-frame exists.

The situation is often highly visible.

The decision has significant consequences

Some risk of survival is at stake.

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1. The situation must be stabilized immediately to keep it from getting worse.

2. The decision should leave all interested parties no worse off than they currently are.

3. Determine if contingency plans are in place to deal with at least part of the problem.

4. Every effort should be made to inform the company’s stakeholders and gather input for the decision if time permits.

5. If there is no good answer, take the least bad answer.6. If acceptable alternatives exist, take the one that can be

most easily changed later if necessary.

1. The situation must be stabilized immediately to keep it from getting worse.

2. The decision should leave all interested parties no worse off than they currently are.

3. Determine if contingency plans are in place to deal with at least part of the problem.

4. Every effort should be made to inform the company’s stakeholders and gather input for the decision if time permits.

5. If there is no good answer, take the least bad answer.6. If acceptable alternatives exist, take the one that can be

most easily changed later if necessary.

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Caveats in Crisis Decision MakingCaveats in Crisis Decision Making

Facts about Team Decision MakingFacts about Team Decision Making

Team decisions take more time than individual decisions. Team decisions are often better decisions. Team decisions typically reflect the broader background of

team members. Team members need to feel comfortable with other members. Team members must understand the goals to work effectively. Team members must use active listening and open

communication with each other. The biggest drawback is the time and effort to make a decision.

Team decisions take more time than individual decisions. Team decisions are often better decisions. Team decisions typically reflect the broader background of

team members. Team members need to feel comfortable with other members. Team members must understand the goals to work effectively. Team members must use active listening and open

communication with each other. The biggest drawback is the time and effort to make a decision.

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International Decision MakingInternational Decision Making

International decisions become more complex and must consider: Customs Laws Customer needs International currencies Governmental influences Political influences Ethical issues

International decisions become more complex and must consider: Customs Laws Customer needs International currencies Governmental influences Political influences Ethical issues

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