Tag: Decision Making

Article Review – Balancing Priorities: Decision-making in Sustainable Supply Chain Management

The article seeks to explore how businesses cope with short-term pressures while implementing newly modelled supply chains that are fitting for competitive and demanding business environments of the modern era. The specific research problem being addressed is the balance between short-term profitability and long-term environmental sustainability in supply chain management. The authors, Wu and Pagell (2011), present various schemes that elucidate how managers in supply management make decisions and manage the balance between short-term and long-term objectives. They also supplement this piece of knowledge by identifying four major bearings that facilitate the understanding of the decisions that organizations make when balancing economic, environmental, and social elements in the triple bottom line framework.

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            The authors begin by introducing the current status of supply management and the need for businesses with older supply management models to examine their supply chains in response to various interconnected environmental and economic challenges that commonly occur in the modern business environment. Nowadays businesses are compelled to achieve their goals while reducing environmental impacts. Nevertheless, in order to balance the two, managers must make many tradeoffs, which impose a form of strain in the parties involved in decision-making. Wu and Pagell (2011) clearly explain the challenges that virtually very organization must confront when attempting to strike an equilibrium between environmental issues and sound business practices. Their claim is that the current business is so dynamic, uncertain, and complex that organizations must prepare to face numerous information uncertainties and adapt to changing decision parameters. The problem statement agrees with the title, and seems to be of educational significance. I find it particularly visible to the average reader because one requires a few readings in order to establish why the study was necessary. The article asserts that existing research is deficient in knowledge related to business models and decision-making processes that underlie sustainable supply chain management.

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            In the literature and theoretical background section, the authors cite clear review of literature to explore the balance of economic and environmental priorities as well as decision-making under uncertainty. These two themes accurately reflect the message that the title of the article conveys. The authors dissect them in a thorough manner to expose the complexity involved in the process of balancing priorities and making decisions in modern-day supply management. They uncover the triple bottom line approach with regard to the balance of economic and environmental priorities and then proceed to introduce the uncertainties that arise during the process of making tradeoffs between the two elements. To create a framework for the study, the authors appropriately cite references and logically connect facts. Statements are clear and concise as they contribute to the overall understanding of the subject and to the reasoning behind the problem statement.

            The research utilizes grounded theory building approach which I find appropriate for the context of the study. This theoretical approach operates inductively, contrary to the hypothetic-deductive approach, allowing the researchers to construct theory through analysis of data. Indeed, Wu and Pagell (2011) commence their study by stating a question before proceeding to collect qualitative data from the sampled organizations. It is important to note that their methods are limited to their resources and capabilities as the area of study is relatively new. Thus, they also adopt the principles of theory building by use of case studies to ensure that their methodology follows a concrete and credible format. The sampling procedures adopt a theoretical approach as well, in which Wu and Pagell (2011) focused on exemplars in sustainable supply management with regard to organization’s environmental decision-making processes. The selection modes are well justified and aspects such as company size are vindicated. Finally, the ultimate sample utilized in the study contains eight candidates consisting of local, global, and multinational supply chains. I agree with the researchers that the consideration of different company sizes, ownership types, and industries enables the generalization of the findings.

            Although the article does not feature any explicit hypotheses because of the nature of the study, the research question “how do organizations balance short-term profitability and long-term environmental sustainability when making supply chain decisions under conditions of uncertainty” guides the research with reference to data collection and analysis tools.  In particular, the data collection procedure makes use of semi-structured interview protocols that target multiple respondents from different functional areas including top management, R&D, purchasing, product and process design, marketing and logistics, and “sustainability.” Based on the type of study, I find the data collection methods in harmony with the research objectives because they amass data on all areas covered by the research question. The data analysis procedure is also coherent. Before carrying out the cross-case analysis between all the organizations, the researchers individually code the data, make comparisons, and perform within-case analysis to comprehend individual business models that each organization adopts as well as the environmental initiatives within each corporate environment. In sum, the methods used to gather data in the study were clear. The researcher have also adequately covered and explained the instruments and development, as well as provided data in table and narrative format.            

The findings are well sectioned, organized, and reported objectively. In their analysis, Wu and Pagell (2011) find that organizations face numerous information uncertainties when making environmental decisions. They are further forced to tackle these uncertainties by establishing and adopting simple rules (Wu and Pagell 2011: 580). The environmental posture also plays a role in determine the trade-offs that organization face when making decisions. Overall, explanations to these findings are categorized into sections in a manner that corresponds to the data being sought in the research question. The discussion of the findings and the concussion sections accurately report the data and formulate the implications in a logically coherent manner to answer the question. Overall, the researchers have followed their research plan precisely and delivered the results in accordance with the objectives of the investigation.

Give Nurses More Autonomy in Wards to Improve Efficiency of Decision-making and Improve Patient Care

Policy Change Proposal Instructions

Identify a policy in your organization that you think could be created or amended to improve organizational governance, operations, or compliance with federal or state regulations. Write a paper that outlines your policy proposal ideas in which you do all of the following:

  • Provide an analysis of how your policy change would improve the organization.
  • Evaluate what changes in the organization would need to be made to implement the policy change.
  • Explain how you would advocate for your policy change while using the approval processes in your organization.

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Give Nurses More Autonomy in Wards to Improve Efficiency of Decision-making and Improve Patient Care – Policy Change Proposal

Policy changes in a clinical set up are necessary in order to improve the efficiency of operations, as well as to improve compliance with patient safety standards and other important government regulations. Policy changes help to ground various activities and how things are done in the hospital environment. The policies help to outline steps and procedures that should be met while performing certain duties in order for the operations to be effective and yield desired results (McComack et al., 2017). Clinical facilities exist in order to serve the need of patients, and as such, the effectiveness and efficiency of policies should be gauged based on patient outcomes. The policy proposal for this paper is one that seeks to give nurses more autonomy in the wards in order to improve the efficiency of decision-making and improve patient care.

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The policy change would help to improve the organization in a number of ways. In most cases, nurses make decisions in conjunction with other medical personnel in the wards in regard to various approaches to patient care. The increased autonomy for nurses to make decisions in clinical situations would allow nurses to respond more efficiently to the needs of patients. For example, in situations where patients who are bedridden are at higher risk of developing pressure sores, nurses can decide on the interval of hours between the patients should be turned on their beds. Pressure sores usually develop in patients who are bedridden for long periods of time due to lying in one position in bed. The sores usually develop in areas where there are bony prominences due to excess counter pressure from the bed surfaces. The principles that are usually applied in the prevention of these ulcers are the implementation of principles for the regular turning of the patients at risk, as well as recommendations for use of special mattresses, such as pressure alternating mattresses (Farahani & Shamsizadeh, 2019). Allowing nurses to make these decisions as quickly as possible will ensure that patients receive the best care, and would also allow doctors to focus on other issues. It will also provide a more efficient and conducive working environment for nurses. Generally, this approach will ensure that the organization is more efficient, and achieve greater positive outcomes in the handling of patients.

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There are a number of important changes that may need to be implemented in the organization in order to accommodate the proposed change in policy. Firstly, the organization needs to invest in building greater capacity among the nurses in order to boost their decision-making capacity. This includes deliberating on ways in which pertinent areas where the nurses can have the autonomy to make unilateral decisions in regards to clinical care of patients. The nurses can also be provided with regular clinical training on how to handle various conditions. The leadership structure in the wards should also be reorganized in order to give authority to nurse leaders to take responsibility for any clinical decisions they make. The organization should also make changes in regards to how doctors and other medical personnel operate in order for them to be available for consultations in are where the nurses feel they cannot make decisions on their own.

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A number of channels would be used in advocating for the policy change. One of the common ways in the organization is through holding deliberations with colleagues and coming up with ideas on the best way to present the issues to the leadership. This approach ensures that the organization is informed in an appropriate way for them to make the best decision (Bel et al., 2018). Another approach would be to directly communicate with the board of management in order to pass the suggestions. This can be done through writing an official email or sending a full policy change proposal to the management for review and further direction on the same.

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In conclusion, policy changes are necessary in healthcare management in order to improve efficiency, as well as improve chances for effectiveness and increase the chance for leading to positive patient outcomes. There are various changes that an organization should make while creating a new policy and these must be considered exhaustively before making any substantial changes. Policy proposals should also be communicated through the right channels in the organization in order to get the best outcomes in terms of the adoption of the proposals.

Decision Making with Managerial Accounting – BUS 630

BUS 630 Final Paper Instructions

Due to varying business characteristics, the managerial accounting techniques applied in each business may differ.  For example, a business in the start-up phase may rely heavily upon budgeting and capital investment techniques; whereas, a business in the mature/maintaining phase may rely heavily upon cost management and quality control. Ultimately, the techniques used by management should assist the business in achieving its short-term and long-term goals through effective decision-making.

For your Final Paper, you will analyze the role of managerial accounting in two parts. Part I will provide a general overview of managerial accounting. Part II will provide examples of how managerial accounting theories and principles are applied in the business world.  You may find it helpful to reflect upon your own professional experiences for examples.

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Part I – Present the following:

  • Define managerial accounting
  • Describe the role of managerial accounting and the management accountant in a business or organization
  • Describes ethical issues/concerns for the management accountant
  • Describes at least three managerial accounting techniques available and their application within a business or organization

Part II – Select at least three of the five topics identified below:

  • Cost Management Techniques
  • Costing Methods
  • Capital Investment Decision Techniques
  • Budgeting
  • Quality Control

For each topic selected, present real-world examples of the application of managerial accounting techniques within a business or organization. Examples may be gathered from your own professional experiences or from case studies obtained from credible sources (excluding textbook examples explored in previous weeks). Presentation of each example should include how a managerial accounting technique was applied in the business or organization’s decision-making model. Be sure to support your example with calculations when applicable.

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Decision Making with Managerial Accounting – BUS 630

Definition of Managerial Accounting

Managerial accounting involves the identification, measuring, analysis, interpretation and the communication of information to managers to achieve the goals of an organization. Warren, Reeve & Duchac (2013) define managerial accounting as the procedures and the processes involved in the creation of documents and reports that facilitate the decision-making process of the management to improve the functions of the company. The success of business entities rely on the decisions made by the management and the stakeholders regarding the functions of the company. Managerial accounting, therefore contributes to this success by providing useful information in the decision making process.

The Role of Managerial Accounting and Management Accountant in a Business or Organization

            Managerial accounting contributes to the success of an organization through planning. According to Braggs (2011), managerial accountants predict the future of business entities by making both long term and short term plans. These plans help in formulating strategies to sustain the business and facilitate market research. The managerial accountants also provide recommendations on how the business should be conducted. They help in determining the price of product, the financing of the projects and they determine whether companies will make or buy and whether they will lease or buy.

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            Additionally, managerial accounting help companies to analyze the margins in the market.  They execute this role by determining the profits and cash flows generated from a specific product, customers or the region of operations (Warren, Reeve, & Duchac, 2013). In so doing, business entities establish their strengths and weaknesses regarding their products. The companies then focus on the production of specific products depending on the analysis generated by the managerial accountant.

            Managerial accounting also assists in the creation of new products by determining the cost of production and comparing them with the target costs. The information obtained from target costing helps the management to plan for the cost of the product, the price points and the profit margins desired from a new product (Baharudin & Jusoh, 2015). The information obtained therefore, ensures that companies maintain profitability and minimize the losses in the production process.

            Finally, managerial accountants conduct trend analysis to determine the changes in the costs incurred and reveal the variances in the patterns. The data obtained is used to determine the rise and the decline of sales in specific products, regions and among customers (Bragg, 2011). The company is therefore, able to predict the future of the product to minimize losses. The analysis of this information also helps in determining the inaccuracies in financial statements. For instance, the management can use the report submitted to determine claims of fraud in the entity. The information is therefore vital for maintaining integrity in the business.

Ethical Issues for the Management Accountant

            The ethical issues regarding the conduct of managerial accountants mainly involve falsifying figures to mask losses within the company. For instance, managerial accountants work with the operational managers to record expenditures as production costs. According to Jaijairam (2017), altering the figures affects the expenses and the outputs recorded in a particular period. It also leads to overproduction and the managerial accountants are forced to use absorption costing.  The false figures affect the decision making process in the management level as it makes it hard to determine the failures of the business entity. Therefore, dishonesty is an ethical issue faced by managerial accountants.

            Ethical issues in managerial accounting also arise based on the allocation of costs. Managerial accountants, therefore act unethically by shifting overhead costs from income statements to contracts (Jaijairam, 2017). Such actions force the clients to pay higher prices for goods and services. Shifting costs affects the credibility of the organization and it affects the accounting statements. Eventually, the repeated actions damage the client relationships due to the high costs of prices and inaccurate billing of contracts.

            A conflict of interest in the part of the managerial accountant also presents ethical issues in the business. For instance, managerial accountants may advance their personal interests more than the interests of the company. In so doing, they compromise the ethics of conduct in the work environment. The inclination towards a specific segment in the entity affects the productivity in managerial accounting (Jaijairam, 2017). The individuals are responsible for providing information to improve the functioning of the whole company not few departments in the company.

Three Managerial Accounting Techniques

            Managerial accounting uses techniques such as marginal costing, budgetary control, cost accounting and reevaluation accounting to determine the profitability of the entity (Cleary, 2015). The marginal costing technique is used to determine the price of the product, the best raw materials to be used in the production process and to determine whether to make or buy decision in the organization. The technique can be applied to reduce the cost of production while improving the profits in a company.

            The budgetary control aspect assess the financial needs of the company and determine the priority of each need (Lavia López, & Hiebl, 2014). It controls the financial performance of the company and determines the spending patterns of the company. The approach can be applied to determine the direction of the company and dictate the spending patterns. Additionally, the cost accounting technique presents data of the cost of the product, in the process, the department and the branch of operation (Cleary, 2015). With this data, the management is able to determine the differences in costs by comparing the information of the entities. Finally, reevaluation accounting ensures that the fixed assets are revalued to represent the capital with the value of the assets. The technique can be applied in a business entity to determine the amount of the returns gained from the capital invested.

Real-World Examples of the Application of Managerial Accounting Techniques

Cost Management Techniques

            Costs can be managed in businesses by reducing the overhead costs, adapting efficient technology, encouraging time management and outsourcing projects (Juras, 2014). An automotive company worked towards improving the sale of a new model in the market while maintaining profitability. The company, therefore, set a selling price for the new model by considering factors such as the attributes of the product, the competitors and the profitability objectives. Research was then conducted to identify customer preferences.  Additionally, the target profit for future product was set based on the Return on Sales (ROS), profit planning and the target profit guidelines. The target cost was then set based on the target profit and the target selling price. The profit feasibility was then assessed to determine the achievability of the target profit. Finally, the cost reduction plans were implemented to achieve the target cost.

            The technique of cost reduction in management accounting was employed in this case. Based on the failure to achieve the target cost, cost maintenance activities were conducted to prevent the escalation of costs.  Lean manufacturing activities were employed in the production stage, the target costs were monitored to determine the costs incurred and a comparison between the standard cost and the target cost variance at the production stage.  With these strategies, the company cut the cost of production while improving profitability through the high sales of the models in the consumer market.

Costing Methods

According to Hilton & Platt (2013), costing methods in companies help in determining the pricing of the product and to analyze the consumption of a particular product.  For instance, an equipment manufacturing company produces several products depending on the customer preferences. The costing process in the company therefore involves the analysis of the raw materials used in the production process, the systems used in the production and pull production. Due to the nature of their consumers, the company produces unique products for each company. The traditional based costing applies to the analysis of the materials in the production process and the systems used for the production. For the pull production with the demand of the customer uses job order posting to calculate the costs incurred.

The product cost in this company is generated through the analysis of materials such as the assembly cost and the cost of the raw materials. The traditional costing method is, therefore, applied by establishing the overhead rate at the beginning of the year and analyzing the overhead rate in the previous year. The rates are then analyzed in the 12 months to determine the new overhead rates. In so doing, the company is able to determine the cost of the products, the sales margins and determine the market price.

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The managerial accounting technique of job costing is applied in the company by the determination of the costs of producing the product. With a focus on the production process and the systems used to manufacture the products, the company determined the profitable areas and adjusted them to improve profitability. The job-order costing technique used also focused on the production of unique items hence they determined the returns acquired from the sale of each item.

Decision Techniques

            Decision making in management accounting involves choosing a course of action from many alternatives. Barry (2011), asserts that the assumption in the alternative picked depends on the least cost incurred by the company. The management accountant, therefore, finds the best alternative for the company. A milling company in a rural area faces a tough decision on whether to buy or lease the land. Based on the scale of the operations and the competitive advantage, the company is likely to exist in the area for five centuries. The management of the company is conflicted on the cheapest option between purchasing the land around it or leasing it for 50 years. The research conducted by the management accountant in the company revealed that it would be more profitable to buy the land. Despite the low return on investments in the few years after purchase, the profits acquired in a few years would be more than the cost invested in buying the land.

            With the information presented by the management accountant, the company eventually bought the land. The profitability acquired in the years after the purchase proved that role of the management accounting in the decision-making process of the management. The process involves identifying the alternatives, collecting data, analyzing the consequences of each alternative, choosing the best option and the implementation of the choice. The information obtained presented the advantages and the disadvantages of buying land over leasing. With comparison of the alternatives, the best course of action is determined.  Working with management accountants therefore, eliminates the risk of incurring losses associated with the decisions made without proper research.

            In conclusion, management accounting contributes to the success of business entities and determines the profitability of the companies. They achieve this through research, analysis, interpretation and communication of information to the management. Despite the ethical issues in managerial accounting, the entity forms a backbone for successful business operations. Several techniques such as costing, budgetary allocation and marginal costing enable the managerial accountants to submit credible information for the operations of business entities. The information gathered, therefore, enables business to maximize profits by minimizing the risks involved.

Role of Perception in the Decision Making Process

Write a paper examining role of perception in the decision-making process. Use format below:

  1. what is perception?
  2. how can a person’s perception of others impact an organizations behavior?
  3. what are the positive and negative effects of using perceptive shortcuts when judging others?
  4. how are decisions in real world organizations made?
  5. how can our perceptions shape ethical or moral decisions?

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What is the Role of Perception in the Decision Making Process

What is perception?

Perception is the process by which people acquire, interpret, select and organize sensory information to give meaning to their environment. Perception is important because people’s behavior is based on their perception of what is considered real or unreal. Therefore, the world that is perceived is the world that important behaviorally. People gather information about the world and use actions to interact with it. Any perceptual deficits lead to profound deficits in action and thus affect those impacted by these actions. Perception is affected by the perceiver’s attitudes, motives, interests, expectations and experiences. The situation and target can also influence perception. Perceptual information is important in the decision making process. Most decision makers use perception to evaluate, create and choose from a set of options. Perception creates our experience of the world around us and influences how we act within a given environment (Santagata, & Yeh, 2016). Organizations rely on the choices that are made through perceptual models for their success. Right and correct choices lead to business success while wrong and negative choices cause failure.

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How a person’s perception of others impact an organization’s behavior

In organizational behavior, perception helps shape a person’s personality and character. This process influences how people act in certain situations. This often affects how they respond to certain things like stressful situations, creativity or their individual performance. Perception is complex. It is the primary reason why different individuals tend to perceive the same situation in different ways (Smits et al 2014). Once we understand the perceptual process, we can understand why certain people behave as they do. Research studies show that what employees perceive from their situation at work influences their productivity. Absenteeism, turnover and job satisfaction are influenced by employee’s perception of the job.

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Selective perception involves employees selectively interpreting what they see based on their interests, experience, background and attitudes. This process allows individuals to speed-read others but risks drawing inaccurate conclusions. Wrongful perception will lead to poor or negative decisions that will lead to the organization’s failure. The employee’s behavior towards others reflects the organization culture. This in turn, affects the overall organization’s behavior. An individual’s perception of other’s affects an organization’s behavior through influencing the decisions and judgments made by the employees who make up the organization (Pantano et al 2017). Based on false information, perception can cause employees in an organization to make wrong choices. How people perceive others has a powerful impact on the organizational behavior because all behavior is reciprocal. One incorrect perception about another person’s intentions can have a synergetic effect on organizational behavior.  It is therefore important to understand that two people can see similar things and interpret differently, perception impacts all decision making and we need to have a rational decision making model to eliminate perceptual biases.

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Positive and negative effects of using perceptive shortcuts when judging others

Effects of perception can be positive or negative. Perception helps organizations to make the right decisions when those involved respects each other’s perspective. Here, decisions are made based on the better option. In cases where employees have negative perception, they tend to underestimate others leading to wrongful decision making. Perceptive shortcuts that have a negative or positive effect on the organization include selective perception, halo effect, contrast effect and stereotyping (Pantano et al 2017). In selective perception, the individual will receive information on bits and pieces that will lead to stimuli that is ambiguous. The person will consequently make decisions made on interpretations based on interest, attitude, background, and the partial information that has been received. The halo effect is seen in individuals that refer to someone from a particular group, geographical area, or social circle based on their intelligence, appearance or sociability. In contrast effect, an individual’s perception is affected by the person that they have recently had an encounter with. This can either enhance or reduce the performance in an organization (Valentine, & Godkin, 2019). Stereotyping leads to individuals having traits or performing in relation to a particular group that they belong. When employees use any of these shortcuts in judging others, the impact of these decisions can lead to positive or negative effects to the organization.

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How decisions in real world organizations are made

Simply put, decision making is the art of choosing between two or more options or courses of action. The process involves choosing between all the possible solutions to a problem. The main decision making styles are analytical, conceptual, behavioral and directive. Most decisions in the real world are made through either an intuitive or reasoned process, or a combination of the two processes. Intuition involves using your gut feeling while reasoning involves using the facts and figures present to take possible course of action. More complicated decisions tend to require a more formal, structured approach. This approach usually involves both intuition and reasoning. It is imperative to be cautious of spontaneous responses to a situation. In most organizations, shareholders collectively elect executive board members who make high-level decisions about the direction of the organization. This board then appoints top managers in the organization, such as the CEO. In most cases, the shareholders have to approve the decisions that are made by the executive board.

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How our perceptions shape ethical or moral decisions

Ethical perception involves individual recognition of a moral issue and realizing that you are the moral agent. The process of ethical perception is the tool and catalyst that drives the entire ethical decision making process. The first step in making any decision that is ethically responsible is determining all the facts of the situation and thorough scrutinizing all possible solutions and their outcomes. Ethical decisions are made based on evaluation and choosing from alternatives in a manner that is in sync and consistent with ethical principles. In the process of making ethical decisions, it is important to perceive and eliminate unethical options and choose the best ethical alternative (Valentine, & Godkin, 2019).

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The ethical criteria for ethical decisions are utilitarianism, justices and rights. The principles off ethical decision making are autonomy, justice, non-maleficence, fidelity and beneficence. By critically exploring the dilemma in which to choose from, these principles may give one a better understanding of the conflicting issues leading to moral decisions.

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Conclusively, in relation to decision making, perception affects our way of thinking. Perception guides us on how to deal with situations that set us in a dilemma. Decisions are often made based on our experiences, interests, attitudes and present facts. Most decision makers use perception to evaluate, create and choose from a set of options. Perception creates our experience of the world around us and influences how we act within a given environment.

Decision Making Steps and Four General Decision Making Styles

Decision-making is one of the essential processes in the day-to-day activities of each person, especially the one in a management and leadership position. The decision-making process is complex as it involves several steps and can be categorized into four main styles. Each of these steps and styles is different and plays a unique role in the decision-making process.

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Decision Making Steps

Decision-making is a step-by-step process, which allows people to seek solutions to problems by weighing evidence, examining alternatives, and deciding on the appropriate path or measures to undertake. The process involves seven steps which include:

  1. Identifying the problem or opportunity that requires a decision. Managers are required to identify the need for a decision by recognizing the real problem or opportunity.
  2. Gathering relevant information. The step involves gathering information, which is related to the problem or opportunity requiring a decision. The information can be gathered through either internal assessment or external sources such as market evaluation or paid consultants.
  3. Identifying the alternatives. Possessing the relevant information regarding a problem or opportunity, managers can identify several alternatives, which are essential to the objectives of the organization.
  4. Weighing the evidence. Upon identifying multiple alternatives, managers have to establish the pros and cons of each of them. Eventually, the alternatives are placed in a priority order based on their possible benefits to the organization.
  5. Choosing among the alternatives. Once the evidence is weighed, managers have to pick the alternative that best suits the needs of the organization.
  6. Taking Action. This step involves developing a plan that will make the decision tangible and achievable.
  7. Reviewing the decision. In this final step, managers have to consider the implications of the decision after a specific predetermined duration of time to evaluate whether the need identified in step one has been solved.

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Four Decision Making Styles

A decision-making process comprises four different styles, which include:

  1. Directive decision-making. It is a style where individuals make decisions based on their personal knowledge.
  2. Analytic decision-making. It is a style in which individuals seek further information and advice from others before making a decision.
  3. Conceptual decision-making. This is an approach whereby individuals depend on intuition and high-risk decisions in their decision-making process.
  4. Behavioral decision-making. It is a group-oriented style in which decisions are made through consulting the members on the best alternative from several options available to them.

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Example of a Rational Decision-Making Process

Two years ago, I went to a computer store to purchase a laptop.  Initially, Lenovo was my preferred brand. I decided to seek information about Lenovo laptops from friends and on the Internet. As a result, I found out that HP and Dell laptops were good alternatives to Lenovo laptops. I had to take into consideration the pros and cons of the three brands before deciding to purchase an HP 15 laptop. Since buying the laptop, I have done several reviews on my decision, and I am happy with it.

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To sum up, the decision-making process plays a significant role in the achievement of both personal and organizational goals. In this sense, decision makers have to follow the seven steps of a decision-making process to ensure the decision is right. Notably, individuals can be classified according to the four decision styles: directive, conceptual, analytic or behavioral.

Individual and Situational Factors that affects Individual Decision Making Process and Their Influence Whistle-blowing Behavior

Personal Ethics In Business – Individual Decision Making

Before exploring individual and situational factors that influences individual decision making process, it is important to understand the key aspects that drives an individual to make ethical decision in the business world. These aspects are psychological biases, organizational cultures and human dignity (Crane & Matten, 2016). The consideration of these aspects by an individual is depended on factors faced by that individual when making the decision. Three important factors that influence ethical decision making in an individual are individual factors, situational factors and organizational factors. However, this report focused on individual and situational factors that affects individual decision making process regarding the perception on how a Multi-National Company conducts its business operations.

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Many studies have shown that ethical decision making by the management in any business is very important in influencing the perception of an individual in relations to how that business conducts its operations. Considering that MNCs carry out their operations in several countries and regions across the world, diverse cultural backgrounds comes into foreplay when making decisions. Ethical decision ensures that security breaches, violation of privacy and illegal use of intellectual property are avoided (Velasquez, 2014). For example, MNC that trades across the world must portrays itself as a company that addresses the needs of diverse cultures. This means the decision making process must be rational. Irrational entrepreneurial decision making influence investors interested in investing their money in the company to have negative perceptions about the company. Therefore, the management of the MNC should utilize adequate data and information and take enough time in order to arrive at rational entrepreneurial decision making. Studies have shown that lack of enough data and information as well as time pressure contributes to irrational entrepreneurial decision making.

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Individual and situation factors on individual decision making

Typically, individual and situational factors work jointly to influence ethical decision in a business. In order to understand how these two factor influences ethical individual decision making in business and how it affects whistleblowing in case of problem arise in the workplace, it is important to comprehend how rational entrepreneurial decision making are made throughout corporation (Deresky, 2017). Generally, individual factors are described as ethical decisions that workers decide to stick to after deliberating on own concepts that he/she considers to be right or wrong. These individual factors are sometimes very complex and can negative affects the workers in their place work especially in the working environment where employees are drawn from diverse cultural background, since an ethical decision can right to some group of workers and wrong to another group of workers based on their personal and cultural background.

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Situational factors include location and time among other factors relates to the situation that influence the perception of an individual regarding certain objects, business operations and culture of an individual in the work place. Perception issues is described as an interpretation of an environment by an individual. Perception play crucial role on how an individual solve a problem and make decision (Dicken, 2015). According to social cognitive theory, bi-directional interaction between behavioral, environmental and individual factors determine whether the decision is ethical or unethical. Typically, environmental factors are similar to situational factors since it is the prevailing conditions that surrounds as individual such as an employee making the decision. Nonetheless, individual and situational factors play crucial role in influencing the perception of employees and subsequently the ethical decision making process.

In addition, the decision made by an individual employee influenced by individual and situational factors determines the whistle-blowing behavior in the organization (Trevino, 1996). Many studies have analyzed whistle-blowing behavior in the public organization through the lens of public service ethics, organizational management, bureaucratic politics and political control. However, this report focused on individual characteristic and organizational characteristics in relations to individual decision making and their influence on whistle-blowing behavior.

Individual characteristics

There are two characteristics that determine whistle-blowing behavior in any organization: these are mission valence and work motives. Research studies have shown that employees that tend to raise alarm when a problem occurs in an organization are committed to the organizational values and loyal to the organization (Jones, 1991). The concept of mission valence was advanced by Rainey (2009) to mean that “affective orientation towards particular outcome” (Rainey, 2009). Other studies have referred mission valence to mean workers perceptions of the salience or attractiveness of a company’s social or purpose contribution which is derived from individual experiences and satisfaction from advancing that purpose.

It is clear that varying levels of mission valence influence the outcome of human resource in terms of job absenteeism and satisfaction in an organization. Further analysis indicated that employees tend to align their expectation with the mission of the organization. For example, organization that tend to have more attractive mission, employees strive to be associated with the organization (Lavena, 2016). This also reflect the commitment of the employee to the organization as well as the urge to report any wrong doing in the organization. Therefore, individual decision to whistle blow correlates with the attractiveness of the organizational goals and job satisfaction.

The second individual characteristic associated with whistle-blowing behavior is work motives. According to the theory of public service motivation, unique service ethic commonly associated with public-sector make the employees to be prone to engage in whistle-blowing. In addition to this, morality and personality of individual influencing ethical decision making process contribute significantly to whistle-blowing behavior (Haines & Leonard, 2007). There are three important factors that drives an individual’s behavior towards whistle-blowing: affective motives such as human emotions; norm-based motives such as loyalty, duty, patriotism and public interest; rational motives such as utility maximization.

Organizational characteristics

These characteristics encourages employees to report any problem that arises in the work place and is likely to negatively affect the operations and the perception of the organization. Structure, culture and environment are among the first characteristics that determines whether the employees are willing to speak out when they noticed a problem in an organization. For example, studies have indicated that when the employees are provided with the supportive environments such as legitimatization of certain organizational values increase the chances of whistle-blowing (Akbar, et al., 2016). Similarly, organizational culture that is more tolerant to responsible employees increases the chance of whistle-blowing. Research have showed that organizational structure that does not tolerate dissent encourages the employees to externally whistle-blow, hence discouraging whistle-blowing within the organization.

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Respect and openness are also organizational characteristics that influence the extend of whistle-blowing in the company. Studies by Miethe and Rothschild (1994) indicated that companies or organizations that encourage openness and “permissive of employee voice in a decision-making process” encourages the employees to whistle-blow internally since they strive to maintain legitimate purpose of the company. Respectful and open organization also have mechanisms such as internal channel for resolving problems (Jones, 1991). Some researchers have argued that more open and respectful organization allows the employees to address issues happening internally without reporting to the oversight bodies thus discouraging whistle-blowing. However, the reality is that a respectful and more open company or organization encourages employees to practice ethical behavior thus reducing mistakes internally hence less reporting and subsequently less whistle-blowing.

Flexibility and cooperativeness are the third characteristics that influence whistle-blowing in the organization. Studies indicated that cooperation in the work place is the main driver of cohesiveness and teamwork when making decision regarding ethical environment and practice. It is also considered to be one of the determinants of whistle-blowing (Rainey, 2009). Flexibility in the workplace allows the employees to minimize the risks of committing mistakes in the organization. For example, the empirical study of police whistle-blowing and ethical climate in the state of George by Rothwell and Baldwin (2007) showed that team interest environment such as caring for an organization enhances the willingness of the people to report on misconduct, felonies and misdemeanors.

However, it is important to understand that organizations with more cooperation and flexibility of communications flows among the workers and between the management experience minimal wrongdoing. This means that whistle-blowing by the employees is less. In addition, cohesiveness and teamwork among the employees creates mechanism that addresses the mistakes internally because they perceive that external exposure threatens solidary among the employees in the organization (Akbar, et al., 2016). Nonetheless, whistle-blowing does not means that when any wrongdoing occurs in the workplace, the employee should resort to external exposure before seeking attention from the internal management. Typically, external whistle-blowing should come as the last resort after the internal intervention has completely failed.

The fourth organizational characteristic is fair treatment in the work environment. Studies have shown that when the employees operate in an environment that is perceived to be of high integrity and fair tend to be at ease to talk to the management regarding wrongdoing without any fear of reprisals (Velasquez, 2014). In addition, employees are very committed in ensuring that organizational goal of ethical practice is observed and an individual employee may choose to remind any employee that stray away from the path.

Moral intensity

The individual decision making process is generally activated by the need to solve prevailing problem. This means that moral decision is not different since the process starts with the problem which requires moral components to provide solutions (Trevino, 1996). The moral issues or moral component of the problem have been characterized in terms of its moral intensity. Decision making process under the lens of moral intensity follows four stages: recognize moral issue, make moral judgement, establish moral intent and engage in moral behavior.

Recognition of moral issues

Recognition of moral issues is very crucial since a moral decision making process by an individual start with this first stage. Some scholars have argued that many decisions in business are moral decisions, but the decision maker tend to overlook the need to recognize the moral element in their decision making process (Lavena, 2016). Moral issues prevail when an organization implement an action following a decision made and the outcome of the action harms or helps people that have direct and indirect relationships with the organization. Recognition of moral issue requires a consideration of two elements. The first element is that decision maker must acknowledge that his/her decision has consequence on human beings. The second element is that some decisions requires input from other people since an individual has volition. Therefore. an individual that do not recognize moral issue do use moral decision-making schemata. For example, when an individual is not using moral decision making schemata, he/she is using other schemata such as economic rationality.

Moral judgements

 The moral judgement comes after the recognition of moral issue. Studies have suggested that moral judgement is achieved through a combination of six analytically distinct steps. The first step involves obedience and punishment which is a condition that a person observe the rules because he/she does not want to be punished. The second stage involves instrumental purpose and exchange, where a person observes the rules for furtherance of his/her interest. The third stage is interpersonal accord, conformity and mutual expectation, where a decision maker adopts moral standards because his/her peers have adopted (Haines & Leonard, 2007). The fourth stage is social accord and system maintenance, where an individual decision maker adopts moral standards of the society such as specific law. The fifth stage is social contract and individual rights, where a decision maker understands the relativity of values and he/she obey the rules because they are consistent to the social contract. The sixth and last stage is universal ethical principles, where the decision maker adopts their own ethical principles event if it contradicts the laws of the land. Many studies have linked the process of moral judgement with cognitive moral development due to strong influence on ethical judgement. The linked between these two decision making process model comes as a result of cognitive process that involves moral judgement in decision making process.

Moral intent

Following moral judgement process that was realized through a process of cognitive moral development, the next is for the decision maker to decide what he/she intent to do. It is important to distinguish between morally correct judgement and the decision to act on morally correct judgement which is to establishment of the moral intent. Moral intent involves a balance between a moral factor and other factors such as self-interest (Trevino, 1996). For example, a supervisor in an organization refuses to fire a senior employee since he/she considers the action to be a right thing based on moral judgement, but he/she may decide to fire him/her anyway due to failure his/her part to establish moral intent following organizational pressure or career advancement. Real life experience of the above example was a situation that occurred in relations to the Aircraft Brake Scandal where Kermit Vandivier decided not to speak out about the company even after being aware that the company was selling unsafe product. He what was right but he decided to take no action about the scandal.

Moral behavior

This is the last step of moral intensity which involves acting on individuals’ moral intention i.e. engaging in moral behavior. According to Rest’s model, moral behavior is a process of “Executing and implementing a plan of action. It involves working around impediments and unexpected difficulties, overcoming fatigue and frustration, resisting distractions and allurements and keeping sight of the original goal.” Social cognition established a useful theoretical link between moral behavior and moral intensity (Velasquez, 2014). The argument is that human being are inclined to respond to request for help when the problem is uncontrollable and less likely to respond to a problem that is controllable. For example, human beings puts more efforts to assist individuals who are facing predicament that are not their responsibility.

Recommendations

Students are likely to be faced by three ethical dilemmas that relates to the moral decision making process. The first time is mean stage level for a dilemma which requires the students to decide between human life and the obedience of the law. The second ethical dilemma is the decision between personal career and personal intergrity. The third ethical dilemma is s decision between professional duty and the obedience to a superior.

It is recommended that the training for new graduates should focus on addressing these dilemmas in order to assist the students to make right decision in business. For instance, in the first dilemma where the student finds it challenging to make a decision about human life versus obedience of the law. When faced with this problem student should put human life fast and obedience of the law second. In the aircraft brake scandal, the Kermit Vandivier should have decided to put human life first and whistle blow about it.

Where the student is required to choose between professional career and personal integrity, it is recommended that the training should inform them that personal integrity supersede professional career. It is important for the students to understand that they can develop professional career by pursuing their personal integrity. Therefore, personal integrity supersedes professional career. Similarly, students can balance between professional duty and obedience of their superior. This can be achieved by ensuring that training focus on professional duty while obeying the superior.

The Six Steps to Organizational Decision Making

Organizational Decision Making

            Organizational decision-making is a process that occurs daily in organization, which employees go throughout their work experiences. No matter the importance that a particular decision being made possess, it will influence negatively or positively on the organization and its customers (Daft & Marcic, 2010). The paper will analyze and interpret the six steps of the organizational decision making, as well as giving the significance of each step.

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The Six Steps to Organizational Decision Making

According to (Daft, Kndrick, Vershinina, & Kendrick, 2010, 2010, p. 322), six major steps are necessary for an effective decision to be made. The authors point that the first step in the managerial decision making process is the definition of the problem. The requirement to make a decision may result due to a problem or an opportunity. This step involves the analysis of the internal and external environment, seeking of opinions and gathering of information. This initial step is similar to the military intelligence gathering. The process of defining the problem in the decision making process is important in developing an understanding of the problem or the opportunity, its potential impacts and possible solutions.

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The second step of organizational decision-making is the diagnosis and analysis of the defined problem or opportunity. (Daft, Kndrick, Vershinina, & Kendrick, 2010) asserts that diagnosis is the process where the organization manager analyses the factors that underlie the situation identified in the first step. The step helps the managers to specify the event that happened and the reasons behind its occurrence.

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The diagnosis is followed by the generation of the possible alternatives that will help in response to the situation and aid in correcting its causes (Daft, Kndrick, Vershinina, & Kendrick, 2010). According to the authors, the generation of alternatives is easier if the decisions are programmed. Otherwise, the decision makers may be forced to make custom-made decisions, which involve the evaluation of the possible alternatives that conform to the organization needs. This step is important as it provides the possible solutions to an identified problem. Moreover, it provides an opportunity for the managers to incorporate alternatives, which the organization might not have envisaged had the problem not occurred.

After generating the alternatives, the next step is to select the appropriate alternatives from the set of alternatives arrived in step third step (Daft & Marcic, 2010). The best choice is the one whose solution offers the best fit to the organization goals and values and achieves the required results with the use of the least resources. This step offers the opportunity for the managers to gauge the prospects of success with the chosen option.  Since this step yields more than one alternative (Lunenburg, 2010), the choice of particular alternative is dependent on the manager’s personality and his/her willingness to take risk. The fifth step is the implementation of the chosen alternative. According to (Daft, Kndrick, Vershinina, & Kendrick, 2010, p. 326) the successful implementation of the chosen alternative involves the use of administrative, managerial and persuasion abilities. This step is important as it ensures the chosen alternative is put into practice. However, after successful implementation, there is need for reviews and evaluations to determine success and areas that need corrective. The review and feedback done after implementation constitutes the last step in the decision-making process. In this step, the information regarding implementation are gathered to determination the decision implementation and whether it was effective. This step provides an opportunity for feedback for the development of new decision cycles.

Leadership And Decision Making

Leadership

Leadership is defined as the achievement of an objective by human assistance. While a successful leader is the one that engages employees based on their needs and understand what motivates them. Good leadership style is the one that create the opportunities for the employees to learn and grow without restrictions(Ballantyne, Berret, & Wells, 2011). There are four major factors that influence the choice of leadership style: personality, belief system, and company culture and employee diversity.Leadership is a much expansive concept than is management. Even though managers are perceived as leaders, management is concentrated on the accomplishment of organizational objectives. Leadership in contrast ensues whenever one person endeavor to impact the conduct of an individuals or group-up, down, or oblique in the organization irrespective of the reason(Spooner, 2015). It may perhaps be for individual goals or for the aims of others, and these goals may or may not be consistent with organizational objectives. Leadership is characterized with an individual with the following competences: (1) aptitude to identify or comprehend the circumstances they want to influence, (2) adapting for the purposes of allowing their conduct and other resources to close the breach between the existing condition and what they are anticipating to achieve, and (3) capability to communicate effectively.

It is challenging to fully conceptualize leadership due to many contestation of style of leadership and its impacts on the organization. Nonetheless, it is important to differentiate two aspects of leadership. The first aspect of leadership is the one that relates to provision of direction, spearheading the organizational vision and making decision regarding the allocation and distribution of resource(Yates, 2001). There are several means of achieving these, some leaders may use dictatorial or autocratic style of leadership, while others may prefer to use laissez faire or democratic means. These styles of leadership differ based on source of power and the impacts on levels and the extent to which workers contributes or participate in decision making process in the organization(Kennedy, Deuel, Nelson, & Slavit, 2011). The extent and the quality of workers participating in organizational decision making tend to reduces as the leadership style move from democratic to autocratic.

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The second aspect relates to issues of exerting influence and control. These two aspect involves ability to obtain power, retain and allocate resource. In this case power is applied to enforce decisions and the outcome may not be desirable to particular group or individuals. But in the case of democratic or laissez faire style of leadership, power is distributed among the members so that each staff member have equal opportunity to participate in decision making(Park, & Datnow, 2009). The differential distribution of power in organizational decision making form the basis of development of various concepts of leadership. The primary difference between these styles of leadership is the level of emphasis from strategic to operational and the extent of inclusion in organizational decision making. For example, leaders operating in contemporary educational institutions find it challenging to strike an optimal decision making processes due to increased heterogeneity in terms of diversity of teaching staff and students

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Personality of an individual cannot be ignored when choosing a person to lead a group of employees. It is important to aligned personality of an individual with specific methods of management for an organization or entrepreneur to be successful. This allows the leader to work comfortable based on his/her basic nature. For example, a manager who prefers to strictly follow set protocols is likely use authoritative style to make employees perform their duties(Yates, 2001). While a charismatic manager is likely to use democratic style where employee are left to carry out activities with more freedom.

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Leadership theories

            Leadership continues to attract more attention from scholars and academic community, thus the number of research and investigation has increased in the past decade. As a result, leadership theories and approaches have continuously been improved with increasing studies. Leadership theories can be grouped into two broad categories: authoritarian leadership theories and inclusive leadership theories(Fielder, 1967). Through categorization of leadership theories one is able to clearly comprehend organizational decision making process. To start with, authoritarian leadership theories describes a leadership approach whereby a leader intends to implement a very specific vision and that vision needs not to be compromised. Although, other staff members do not participate in organizational decision making, data input is still required to aid in arriving at effective decision.

            In the other hand, inclusive leadership theories describes leadership approach that allow other staff members to participate in organizational decision making process. Inclusive leadership theories can be further categorized into two: distributed and collaborative leadership. Distributed leadership is an approach whereby decision making process is distributed to different levels in the organization(Yates, 2001). This style of leadership creates an atmosphere for exchange of information and give the opportunity to the staff to rectify their mistakes without being penalized. Distributed leadership has three important elements:

  1. Encourages leadership to recognition and the use of experiential and internal intellectual resources.
  2. Distinguishes lateral and top-down decision-making process.
  3. Promotes collaborative inquiry and culture building through dialogue.

This leadership style encourages team work because decision making process is distributed and people involve in decision making would consult each other and work collaboratively.

      The second category is collaborative leadership approach whereby decision making process is shared which is clearly a suggestion of inclusive leadership style. Collaborative leadership approach encourages people to work collaboratively which is dependent of the leadership(Spooner, 2015). This leadership style promote the effective utilization of individual talent and organizational framework to make appropriate decision based upon available information. Studies have shown that this type of leadership provide leaders with the opportunity to make decisions that enables the organization to compete globally. Regardless of the approach an organization utilizes whether it is authoritarian or inclusive approach, information is necessary to arrive at effective decision(Kennedy, et al., 2011). The information is important when evaluating the opportunities that the organization can utilize in order to make decision that make it competitive advantage in global economy.

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Decision Making

            Decision making process can be analyzed from three perspective: at the personal level, at a small group or aggregate level and at the organizational level. At the personal level, an individual undergoes a generic problem solving cycle in the process of making personal decision about the issues that needs to be solved. Personal decision ranges from rational and structured to irrational and unstructured based on complexity, availability of resources and time(Park, & Datnow, 2009). Decision made at a small group or aggregate incorporate more structured methodologies which comprisesrational problem solving strategies about the issues that relates to operations. While decision making at organizational level tend to be more strategic because it involves senior management team who are tasked with the responsibility of carrying out strategic decisions about the organization.

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            According to Bernhard (2006), decision making is defined as “the process through which an individuals, groups or teams arrive at implementable outcomes from a range of competing choices about issues in their organizations.” This definition present two key phrases ‘implementable outcome’ and ‘from a range of competing choices’. This means that decision become valid when it has been implemented and that decision was arrived at after weighing other potential solution to a given issue. The extent to which an individual feels to be capable of participating in decision making process through making choices among the possible solution is a key indicator of the decision quality. Many people would like to get involve in decision making process if the choices made are perceived to have some bearing in their private and public lives as the staff of the organization.

            Hoffberg, & Korver, (2006) identified four important that leaders make mindful tradeoffs to balance contradictory needs within the decision process itself. The four key decision paradoxes are:

  • Inclusion vs. efficiency: Leaders find themselves in dilemma on whether to include other people in decision making process or avoid the cases of debate and dialogue and make decisions on their own. Although inclusive decision making can be costly in terms of time, it leads to quality decisions because of diversity and inclusiveness. Empirical evidence suggested that more strategic decision prefer efficiency over inclusion, while operational decision prefer inclusion over efficiency.
  • Empowerment vs. control: Leaders should choose the degree to which responsibility is delegated when making decision starting from problem framing to announcing the decision. Some leaders prefer to be involved in every step of decision making, while others would prefer to delegate responsible to other staff members to work autonomously.
  • Instinct vs. method: Some leaders would prefer to use instinct to resolve emerging problem under certain circumstance based upon their experience. The implication of this approach is that it leads to speedy decision, but the leader should monitor the outcome so that appropriate adjustment are made as they go(Spooner, 2015). Other leaders would prefer to use specific methodology to arrive at the decision. This approach is more cautious because it involves the consideration of alternative, opportunities and risks before taking a decision.
  • Head vs. Heart: Leaders agonize whether to resolve emerging problem through divergent thinking and creativity or through compassion and emotion on the other hand. Leaders must balance the extent to which other people’s emotion and their own emotions and needs override or influence the consideration of decision making.

Models of decision making

            Despite the existence of multiplicity of organizational decision making models, they are grouped into three broad categories. These are:

  • Rational decision-making models: The models are relied on the economic perspective of decision making, founded on optimality, consequence, alternative and objectives or goals. The assumption made on this model is that full information regarding the problem is available, therefore the leaders would assess alternative solutions before settling on the optimal solution that would be implemented(Yates, 2001). The advantage of these models is that it utilizes logical and sequential approach grounded on authentic information. Further assumption with these models is that the individuals involved in decision making process do not introduce their own intrinsic biases in the process.
  • Political decision making models: Contrary to rational approaches, political models focuses on people biases and preconceptions in the decision making process. People involved in decision making process are perceived to be motivated by their own perceptions and needs. These models advocates for negotiation and bargaining among decision makers to accept one particular choice(Hoffberg, & Korver, 2006). Unlike rational models, political models to some extend involves deception because full information is withheld intentionally or not available, thus making one side of the decision makers to be advantages. The advantage of political models is that it reduces conflicts by acknowledging the significance of personal subjective views in decision making, as long as one side of the decision makers successfully manages to convince the other group to support their choice(Park, & Datnow, 2009). However, political models does not guarantee optimal solution to the problems, thus possibly resulting to long-lasting detrimental effects in the organization by wear away people’s confidence.
  • The precedent models: These models highlight the importance of past experience and precedent. The assumption made on this models is the emerging problem must have occurred at one time in the organization, therefore, these problems are predictable and should serve as reference when solving the current problem(Hoffberg, & Korver, 2006). The model strictly follow pre-established procedures and guideline which form a basis of decision making. The advantage of this models is that the solutions can be tested and tried before implementing. However, the precedent models suppresses new ideas and innovation. Newer and young staff in the organization may feel discriminated because the models relies on the past experience.

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Instituting inclusive decision making process

  • Undertake inclusive review: the first step is to review the characteristic of the company i.e. the size, the type of work, the employees, the customers and the objective of the company. During this process, the leadership should also consider the legal requirements and sector-specific standards that need to be complied with(Kennedy, et al., 2011). While undertaking an inclusive review, organizational demographic plays crucial role in determining the make-up of the work force in the work place such as age, gender, religion, ethnicity and disability.
  • Formulate an action plan: this is the process of devising the best action plan that can be implemented to boost inclusive participation in decision making process at all levels in the work place(Kennedy, et al., 2011). The action plan include; actively involving employees, creating a culture of inclusion and respect, inclusive recruitment, development and promotion of employees and inclusive consultation.

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  • Communication and implementation of the action plan: the means of communication a leader would choose to communicate with the employees depends with the nature and size of the organization. Common ways of reaching out to the employees include;
  • Organizing for seminars and luncheon events where the management could interact freely with the employees as they discuss about the action plan.
  • Creating interactive web page which is accessible to all employees
  • Posting the action plan on the notice board and staff intranet where employees can access the information conveniently.
  • Disseminating information in other formats such as newsletters since all the employees in the work place might not be accessible to computers. The information must be written in the simplest language that all the employees understand.
  • Regular review of policies and practice: the process is very important in the workplace since it would be guiding any changes that need to be implemented as well collecting the feedback from the employees about the practices that should be changed in order to improve working environment

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Benefits of inclusive decision making in the workplace

  • Attracts new talents to the organizations since the workplace promote culture of togetherness and allow workers to express their ideas freely.
  • Retained experience, committed and productive staff as that new employees will learn from the experience work force.
  • Widen the customers’ ranges and explores the area that have not been exploited in the business.
  • Create an inclusive work force that brings together people of different works of life.

Performance Objectives in Outsourcing Decision Making – A Case Study of Costa Coffee

Introduction

Established in 1971 by Bruno & Sergio Costa, Costa Coffee started as a wholesale operation supplying roasted coffee to caterers and specialist Italian coffee shops with an exciting coffee, slow roasted the Italian way. The business opened the first Costa espresso bar in Vauxhall Bridge Road in London in 1978. Having been acquired by Whitbread in 1995, the business has grown to over 2,800 stores across 30 countries (Liang & Wu, 2011).  Costa is the top 1 of chain coffee shops, by franchises, with over 1,300 coffee shops in the UK with close competition from Starbucks and Cafe Nero. It should be noted that about 10% of the loyal customers of Costa make over 50% of the visiting (Liang & Wu, 2011). Costa has in the recent past developed new products such as lower caffeine and calories drinks in a bid to keep existing customers and attract new customers. It is imperative that coffee shops need to come up with various ranges of quality products, excellent service in a bid to increase customers’ loyalty as well as enhance the relationship with customers. Consequently, there is need for Costa to explore outsourcing options as a popular method of achieving their performance improvement. 

Although outsourcing has become an increasingly popular method of achieving performance improvement, the results have been mixed. There are a number of organizations that have not achieved the projected and desired benefits associated with outsourcing. There is need therefore to focus on the performance measurement in the outsourcing process, both at the corporate strategy and at the process level. In addition, it is vital to develop an outsourcing decision framework in a bid to overcome the major drawbacks and weaknesses of outsourcing (Perunovic & Pedersen, 2007). This paper assesses the issues of performance measurement in the outsourcing decision by focusing on the performance objectives of Costa coffee. The paper seeks to provide guidelines on decision whether outsourcing is appropriate for Costa, and how the outsourcing should be managed with an aim of improving performance.

A Recapitulate of Performance Objectives

It is important to understand the broad stakeholder objectives, majorly because different or conflicting priorities between stakeholder groups invariably provide the backdrop to outsourcing strategy decision making. Outsourcing operation calls for a more tightly defined set of objectives. The five performance objectives are; quality, speed, dependability, flexibility, and cost (Slack & Lewis, 2011).  Quality refers to the specification of a product, normally implying high specification.  Product or service specification involves two concepts which are; the level of the product or services specification, and the degree to which an operation achieves conformance to the specification. This consequently implies two types of quality namely; specification quality, and conformance quality (Nazeria et al., 2012).

Speed as a performance objective indicates the time between the onset of an operation process and its end. As far as outsourcing is concerned, speed is considered to be the elapsed time from the time the customer requests a product or service, to the time when the customer receives it.  Dependability is considered to mean the keeping of delivery promises while honoring the delivery time given to the customer. Dependability is one half of the delivery performance along with delivery speed.  Another performance objective is flexibility. In operations strategies, such as in outsourcing, flexibility implies the ability to different states, taking up different positions as well as different things. An outsourcing operation is thus flexible than another if it can exhibit a wide spectrum of abilities (Slack & Lewis, 2011). Flexibility can fall into various categories including product or service flexibility, mix flexibility, volume flexibility, and delivery flexibility.  Cost is considered to be the most important performance objective. The lower the cost of producing a product or service, the lower the price transferred to the customers (Nazeri et al., 2012).  Cost is thus considered to be any financial input to the operation in the outsourcing process. The cost can come in three different categories namely; operating expenditure, working capital, and capital expenditure (Slack & Lewis, 2011).

Outsourcing Decision Making Model

Outsourcing encapsulates the utilization of external resources whereby the execution of tasks, functions and processes that were conducted in-house are commissioned to an external provider who specializes in a particular area subject to long-term cooperation. It is the operation of shifting previously executed internally to an external supplier through a long-term contract involving the transfer of staff to the vendor company. Outsourcing would aid Costa as an enterprise to concentrate on its strategic goals and tasks in a bid to minimize expenses on functions that are necessary but unrelated to the company’s basic functions of coffee shops.  The primary reasons that would drive Costa to outsourcing are; the need to reduce cost or internal headcount, insufficient performance of internal manufacturing or service, and constrained internal capacity due to increasing market demand. Other factors that would necessitate outsourcing include strategic sourcing process, underutilized internal capacity, and regulatory and legal requirements (Perunovic & Pedersen, 2007). For Costa, strategic sourcing process would be the major driver to outsourcing which presents a best practice for risk management.

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In determining what should be outsourced, Costa Coffee needs to consider the following aspects;

  1. The company’s core competencies
  2. Quality of coffee products and services
  3. Cost of internal supply relative to external supply
  4. The need for specialized capability in the coffee shops industry

The cost of internal verses the external supply should be a major consideration for Costa in making the decision to outsource. Using cost as a performance objective, the company needs to identify the actual tasks performed by the functions intended to be outsourced. The total costs which include interdependencies need to be defined in a bid to identify any indirect costs related to the outsourced function (Perunovic & Pedersen, 2007). In determining the relation between internal and external supply will aid the Costa management in achieving other strategic goals such as management of risks due to constrained capacity, and market share expansion.

The need for specialized capability from a supplier is crucial in helping Costa management to appreciate that outsourcing decision should be directly linked to their corporate strategy as well as their core competencies. Third party supplies, such as IT service providers, can be instrumental in enhancing performance of the entire value chain (Nazeria et al., 2012). This key driver to outsourcing, coupled with Costa core competencies, will help achieve the performance objective of quality, dependability, as well as flexibility of product and service delivery.

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 Costa can outsource It services, concierge, business centers, as well as restaurants. For business centers, for instance, Costa can high a company that specializes in running business centers for places such as malls, conventional centers, airports, and hotels. Another area that Costa can outsource is the employment aspect. While they may retain a small human resource department, the company can hire human resource consultants and recruitment agencies to deal with their employment aspect of the business. It is imperative that outsourcing will allow Costa to focus on its core, value-enhancing activities without the distraction of running support services such as concierge and IT services. Some of these support services can soak up both financial and management time resources thus dissuading a company not to use its resources fully in gaining competitive advantages. Furthermore, outsourcing allows access to cutting edge talent and expertise thus outsourcing to specialist companies allow access to latest and innovative technologies. Other areas that Costa can outsource include; accounting services, document handling, and fleet management.

Potential Disadvantages of Outsourcing

One of the major drawbacks of outsourcing is unexpected costs.  While most costs are more predictable owing to the fact that the supplier carefully defines what the costs cover, there is a likelihood of substantial additional charges for anything extra. The process of outsourcing is difficult to reverse. This implies that once a process has been outsourced it is difficult to bring it back in-house when the internal knowledge is gone. In the event that the outsourced company does not perform effectively, there is the risk of damaging the reputation of the outsourcing company. The success of the company is highly dependent on another company’s performance. This indicates that outsourcing shifts more responsibility for success to a third party (Smith, 2012).

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Outsourcing Risk Analysis and Mitigation

Organizations seeking to outsource need to develop strategies and plans for the assessment and management of risk. Proactive and effective outsourcing process risk management can aid in predicting and preventing major implementation risks and problems. One of the risks associated with outsourcing is the decline in delivery performance as well as end customer satisfaction levels due to delays of the outsourced company. This risk is caused by various factors that are out of the outsourcing company’s control.  Service or product quality may also suffer from outsourcing which in turn affects the customer satisfaction.  There is need for outsourcing companies to carefully select, qualify, and contract with their outsourcing partners in a bid to ensure that quality and delivery time are not compromised. This calls for adequate transition periods together with cross-training between the two companies. When the suppliers are not financially viable, there arises the problem of exposing the outsourcing company to supply interruption risk. The outsourcing company therefore needs to ascertain the financial capability of their external suppliers (Smith, 2012).

Risk analysis needs to be a point-in-time assessment which should be performed prior to the selection of the company to be outsourced. However, risk analysis should be used as a periodical tool to reassess the supplier’s risk over the contract time. Risk management on the other hand is to be taken as an ongoing process that should involve; supplier and contract management, billing accuracy, and service level agreement. It is paramount for Costa to identify the outsourcing contracts with the highest level of risk as well as importance. After successful identification of various risks, it is important to classify the contracts as high, medium, and low risk in a bid to ensure effective management (Perunovic & Pedersen, 2007).

Cost and Decision-Making Analysis – Cheryl Montoya Case Study Sample Solution

Breaking Even

The break-even point refers to the amount of sales where the cost of doing business is equal to business revenue. In this particular point the net business income is equal to zero. The break-even point demonstrates the point where the revenue of the sales equal the total business cost which include total fixed costs plus total variable costs. One way to compute break-even point is by use of break-even analysis method. This technique of computing breakeven point offers managers a powerful quantitative tool that can aid in decision making. In its modest form, analysis of breakeven offers an intuition on if or not the service or product revenue contains the aptitude to cover the appropriate production costs of that service or product. The information obtained from breakeven analysis can be utilized by managers to make an extensive range of decision in business, especially on setting prices, applying loans, and preparing for competitive bid. The main methods of determining the breakeven point include the graphical method, equation method, and the contribution method (Garrison, Noreen& Brewer, 2011).

In the provided case Piedmont Fasteners Corporation deals with three different forms of clothing fasteners produced at different units, variable cost per unit and sold at different prices per unit. The company also records total fixed expenses of $400000 every year. To determine the breaking even point, the equation method will be used, which is founded on the formula of cost-volume-profit (CVP) given as px = vx+ FC + profit where FC refers to the total fixed cost, p refers to price per unit, v refers to variable cost per unit, while x refers to the number of units. At breakeven the business profit is zero and in this case, the CVP formula will read as px = vx +FC (Kimmel, Weygandt& Kieso, 2009). Using spreadsheet, the provided data will be analyzed as follows:

Column1 Velcro Metal NYLON Totals
Normal Annual Sales Volume 100000 200000 400000
Unit Selling Price $1.65 $1.50 $0.85
variable Cost per Unit $1.25 $0.70 $0.25
Total variable Cost 125000 140000 100000 365000
Total Sales 165000 300000 340000 805000

In this case, the equation provided can be directly applied to determine the breakeven point since the provided data can easily assist in determining the breakeven point simply by determining the total variable cost which is provided by multiplying the total units produced per year, per product for each product and adding them together. This is given by: Velcro total variable cost = 1.25 x 100000= 125000; Metal total variable cost = 0.7 x 200000 =140000; and nylon total variable cost =0.25 x 400000 = 100000. The total variable cost incurred by the company is 365000 dollars. Thus, with application of CVP formula px = vx +FC, in this case the company will manage to breakeven at px = 365000 + 400000 = 765000 dollars. The company total annual sales are at 805000 dollars. This implies that the company will manage to meet its cost of production and make profit. At breakeven, the profit made is zero and hence the equation px = total variable cost + total fixed cost is used to give a breakeven point value of $765000. The amount above this to $805000 is the company’s profit which is equivalent to $ (805000-765000) = 40000 dollars

Question 2

According to the instruction of the total fixed cost of $400000, $20000 could be avoided in case Velcro product was dropped, $80000 could be dropped in case metal was dropped and $60000 could have been avoided, in case nylon product was dropped. The fixed cost associated with administrative cost, and rent is $240000.

This question will be solved by advancing on the CPV equation defined in question one. The px = vx + FC equation need to be solved further to obtain the value of x that is equals to the break-even point in the units of sales.; FC = px –vx; FC = x (p-v); thus x = FC/(p-v ); thus the  break-even units of sales is = x = FC/ (p – v). In this case, the total fixed cost varies per the type of the fastener being made. The administrative cost and rent fixed in each case is $240000. This will be a constant fix cost for all three products. The actual fixed cost value for each product will be determined by what other fixed cost charges are determined by the production of the product. The breakeven point units for each product will be determined as shown below.

Breakeven point for Velcro

Column1 Velcro
Fixed Cost 260000
Variable cost per unit $1.25
Unit selling price $1.65

 

x = FC/ P-v = 260000/1.65-1.25 = 260000/0.4 =650000 units which are equivalent to $1072500

Breakeven Point for Metal

Column1 Metal
Fixed Cost 320000
Variable cost per unit $0.70
Unit selling price $1.50

 

x = FC/ (p-v) = 320000/1.5-0.7 = 320000/ 0.8 = 400000 units which is equivalent to 600000 dollars

Breakeven Point for Nylon

Column1 Nylon
Fixed Cost 300000
Variable cost per unit $0.25
Unit selling price $0.85

 

x = FC /(p – v) = 300000 / (0.85-0.25) = 300000 / 0.6 = 500000 units which is equivalent to 425000 dollars

The breakeven point for the company when each product is produced alone would be 650000 units of Velcro, 40000 units of metal and 500000 units of nylon. This will be equal to 1072500 for Velcro, 600000 dollars for metal and 425000 dollars for nylon. This amount is obtained by multiplying the units needed to breakeven with the unit selling price for each product. If the Piedmont Fasteners Corporation considers producing all these units collectively per year, the breakeven point will be as follows. px = vx + FC. In this case, the fixed cost will be equivalent to 240000 + Velcro fixed cost + metal fixed cost + nylon fixed cost = 240000 + 20000 + 80000+ 60000 = 400000. Other data will be as shown by the spreadsheet below:

Column1 Velcro Metal NYLON Totals
Normal Annual Sales Volume 650000 400000 500000 1550000
Unit Selling Price $1.65 $1.50 $0.85 $4.00
variable Cost per Unit $1.25 $0.70 $0.25 $2.20
Total variable Cost 812500 280000 125000 1217500
Total Sales 1072500 600000 425000 2097500

 

The breakeven point in dollars will thus be = total variable cost + fixed cost. This is equal to; vx + FC = 1217500 + 400000 = 1617500. Thus the breakevenpoint in total dollar sale will be; px = $1617500. The company’s total sales revenue is 2097500 dollars. Thus, the recorded profit will be; profit = total revenue – breakeven point = $ (2097500- 1617500) = $480000. The company will manage a profit of $480000 in case it decide to produce the amount it needs to produce to make units of each product to match the breakeven point in case the product was produced all alone. This will cut on the fix administrative and rent cost, and hence, giving the company the advantage of bulk production, where the administrative and rent cost involved remains constant irrespective of the activity the company is involved in.

Evaluation of the Costing System of the Company

A costing system in accounting refers to the framework employed by companies to approximate the products cost for cost control, inventory valuation, and profitability analysis. Approximating the actual products cost is essential for operations profitability. A company needs to know the products that are profitable and the one that are not by accurate cost estimation. There are two forms of costing systems which include process costing and order costing. Job order costing system accumulates the costs of manufacturing separately for every job, while process costing system accumulates costs of manufacturing separately for every process. The Piedmont Fasteners Corporation is using job –order costing system where costing is based on the uniqueness of the product, which are produced in small units based on the market demand. The company keeps records of small items involved in the production which include material cost, and time involved in the development of each product. This assist in determining variable cost of every product, which varies based on the needed material and the complexity of making the product (Accounting Tools, 2017).The product cost is thus highly determined by the work involved and the cost of the material used in making one unit of these products. This is different from process costing where large standardized production is made. The company costing process involved keeping detailed records of costs of production which are attributable to unique units or units group. In this case, the company keeps detailed production records for nylon, metal and Velcro, to ensure that it is able to compute separate costs based on the material used in the production of each product, time involved in production and the complexity of production. Thus, the cost varies as per the specific product that was being produced.

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