Qanta Airline has lost approximately 1 billion United States Dollars over the recent past due to slow global economy and ever increasing fuel costs. One of the ways through which the current problem can be solved is by selling the company’s frequent flyer program. However, Qanta’s Chief Executive Officer, Alan Joyce, is still undecided about whether he should sell the company’s frequent flyer program or not. Suppose Joyce chooses to sell Qanta’s frequent flyer program, the company will obviously lose customers to its competitors. This indicates that selling Qanta’s frequent flyer program may either solve the current problem or bring even more severe financial problems than what the company is currently facing (Ironside, 2014). Therefore, Joyce needs to know the best type of decision that will yield positive results.
Decision making is the process by which managers select the most appropriate choices from a set of alternatives with the aim of solving a specific problem (Rao, 2010). The decision that a manager takes can have a short-term impact, a long-term impact, or both. Depending on the implications that a particular decision will bring to an organization, decisions are normally classified as operational, strategic, or tactical.
The decision of whether or not to sell Qanta’s frequent flyer program is a strategic decision. According to Rao (2010), a strategic decision is a choice of action that is intended to influence the entire organization or a very important part of a company. In addition, strategic decisions are unstructured and bring about long-term effects on a company. Alan Joyce is faced with the challenge of making a decision that will influence the entire organization and that will bring about long-term implications on the business. This type of choice is not a tactical decision because it does not involved implementation of strategies. Again, the decision cannot be classified as an operational decision because it is not intended to yield short-term results repetitively (Kourdi, 2003).
Apart from being a strategic choice, the decision of whether or not to sell Qanta’s frequent flyer program is also a non-programmed decision. According to Rao (2010), a non-programmed decision is made in response to either an unusual opportunity or an event that seems to be a threat to a business. Situations that call for non-programmed decision making are often unique and require critical thinking, data collection, and careful selection of alternatives. Qanta’s airline is one of the best performing airlines in Australia with a market share of 65 percent. The huge losses that Qanta’s is currently experiencing are unique to the company and require Ian Joyce to think critically, gather information, and consider various alternatives (Ross, 2014).
As Rao (2010), explains, non-programmed decisions require maximum participation of the higher level management and are highly likely to have an error. Similarly, Alan Joyce is charged with the responsibility of making a decision on whether or not to sell the Qanta’s frequent flyer program because he is the company’s leader. The type of decision made is likely to have an error because it may either assist the company to earn profits or suffer more serious losses. When making the final decision, Alan Joyce must remember that her decision will affect the entire organization, will attempt to solve a unique situation in the company, and is highly likely to have an error (Rao, 2010). Therefore, the decision on whether or not to sell Qanta’s frequent flyer program is a strategic non-programmed choice.
Managers can use either intuitive or rational approach to decision making when faced with any challenge. Intuitive decision making occurs when one relies on his or her instincts to guide their choices. Intuitive approach to decision making does not require reasoning and is largely used when facts are not available. Conversely, rational approach to decision making involves detailed analysis of facts which is done in a step-by-step manner before arriving into a conclusion ((Kourdi, 2003; & Rao, 2010). In order to come up with a conclusion on whether to sell Qanta’s frequent flyer program or not, Alan Joyce can take either a rational approach or an intuitive approach. Suppose Alan Joyce decides to take the rational approach to the decision making, he will have to take a step-by-step process to ensure that she arrives into a conclusion that will yield positive results.
Rational model to decision making involves six steps including problem definition, identification of decision criteria, allocation of weights to the criteria, development of alternatives, evaluation of alternatives, and selection of the best alternative. When using rational approach to decision making, Joyce first needs to define the problem which is clearly known to be huge losses resulting from a slow global economy and increasing fuel costs. This should be followed by identification of the best decision making criteria. In this step, Joyce should predict the outcomes of her decision. For example, Joyce wants to find out whether it is a good decision to sell Qanta’s frequent flyer program. He needs to ask herself how her decision will affect the company as well as its stakeholders both in the short run and in the long run. This step is largely dependent upon beliefs and values of an individual, and Joyce needs to incorporate her values and beliefs in identifying the decision criteria (Kourdi, 2003).
The third step in rational decision making approach is allocation of weights to different decision criteria. In this step, Joyce should rank her decision criteria from the most important to the least important depending on their ability to yield the right decision. After determining the most important decision criteria, Joyce should now start developing possible alternatives that can generate the desired results. For instance, Joyce has two potential solutions that can assist Qanta to start earning profits once again. He might choose either to sell Qanta’s frequent flyer program or reduce the Jetstar budget in order to cut on costs (Ross, 2014). From here, Joyce needs to evaluate her alternatives by assessing the ability of each and every solution to solve the existing problem. Alternatives that are highly likely to solve the existing problem are given more priority that those that are likely to generate the least impacts during selection stage. The final step when using rational approach to decision making is selection of the best alternative. The selected alternative must be able to solve the problem that Qanta is currently facing, and if possible guide the company towards profit generation (Kourdi, 2003).
Since Joyce has been Qanta’s Chief Executive Officer for six years and has a long-term experience in airline leadership, it is recommended that he applies both rational and intuitive approaches to decision making in the present case. According to ( ), rational decision making approach is appropriate for managers who are involved in critical strategic decision making. This is because, mangers involved in strategic decision making are required to analyze facts in details and follow a step-by-step process that will lead into selection of the most appropriate conclusion. As earlier mentioned, the decision of whether or not to sell Qanta’s frequent flyers program is a strategic decision because it will impact the entire company.
According to Rao (2010), managers who are involved in strategic decision making must apply their business judgement and intuition in problem definition and in development of alternatives. Additionally, Kourdi (2003) explains that identification of decision criteria requires manager to use their values and beliefs. Application of business judgement and intuition in decision making is only possible if one has background knowledge about the issue at hand. Joyce has been Qanta’s leader for six years and she also has some experience in airline leadership. From this experience, he will be able to use instinct to guide his decision. This explains why Joyce will have to use both rational and intuitive approaches to decision making in order to come up with the best conclusion.
Suppose a CEO who comes from another industry and does not have airline experience was to make the decision, it is recommended that he or she applies a rational approach. The new CEO will have to use rational approach alone because he or she does not have background knowledge on how to manage companies in the airline industry. This means that she will not be able to apply his or her intuition. When using rational decision making, the new CEO must remember to follow all the necessary steps including problem definition, identification of decision criteria, allocation of weights to the criteria, development of alternatives, evaluation of alternatives, and selection of the best alternative (Kourdi, 2003).