business decision making assignment sample

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5.6: Assignment- Your Decision-Making Process

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• Page ID 47661
• Lumen Learning

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Preparation

The Decision Making module of your text provided numerous decision tools and methods to use during the decision process. In this assignment, you will draw upon your personal decision-making experience. As you learned in the module, people make decisions with our biases and preferred styles in play. You will describe your decision, what choices were involved, how you made your decision, and what the outcome was, relating your process to the rational decision-making process described in the text. The following steps will help you prepare for your written assignment:

• Carefully consider the tools and methods described in the reading to assist with Management Decision Making.
• Think of a decision you have made or been involved in making. This could be a personal decision or a work-related decision.

Outline your decision process as it relates to the six steps of the rational decision-making process described in the text:

• Step 1. Identify the Problem
• Step 2. Establish Decision Criteria
• Step 3. Weigh Decision Criteria
• Step 4. Generate Alternatives
• Step 5. Evaluate Alternatives
• Step 6. Select the Best Alternative

For example, if you’re writing about your decision to adopt a pet, the problem you identify in Step 1 might be that you were lonely in your apartment at night, and you’d always wanted to rescue a dog. In Step 2, you could describe the decision criteria you used to select a dog: your apartment only allows dogs under 25 pounds, you wanted a dog with short hair for easier cleanup, you would only travel to a rescue facility within 50 miles of your house, and so on. If you skipped any of the steps above, note that. Include this outline in your written assignment submission.

Write a two-paragraph essay describing your decision process (as outlined above), including its strengths and weaknesses. Your essay must include at least two properly described and referenced decision methods or styles from the text. For example, if your decision was impeded by bias, describe if it was confirmation bias, anchoring, or some other kind of bias. Answer and address these questions:

• What is your preferred decision-making style?
• How does your style work for you? Are you always satisfied with your decisions?
• What method from the text would you consider for your future decision making?
• How important is decision making in the role of a business leader? Provide an example.

In addition to the text, you are encouraged to research decision-making methods using reliable and properly cited Internet resources. You may also draw from your personal experience with appropriate examples to support your references.

Contributors and Attributions

• Assignment: Your Decision-Making Process. Authored by : Betty Fitte and Lumen Learning. License : CC BY: Attribution

Module 5: Decision Making

Assignment: your decision-making process, preparation.

The Decision Making module of your text provided numerous decision tools and methods to use during the decision process. In this assignment, you will draw upon your personal decision-making experience. As you learned in the module, people make decisions with our biases and preferred styles in play. You will describe your decision, what choices were involved, how you made your decision, and what the outcome was, relating your process to the rational decision-making process described in the text. The following steps will help you prepare for your written assignment:

• Thoroughly read the Decision Making module.
• Carefully consider the tools and methods described in the reading to assist with Management Decision Making.
• Think of a decision you have made or been involved in making. This could be a personal decision or a work-related decision.
• Outline your decision process as it relates to the six steps of the rational decision-making process described in the text:

Step 1. Identify the Problem

Step 2. Establish Decision Criteria

Step 3. Weigh Decision Criteria

Step 4. Generate Alternatives

Step 5. Evaluate Alternatives

Step 6. Select the Best Alternative

For example, if you’re writing about your decision to adopt a pet, the problem you identify in Step 1 might be that you were lonely in your apartment at night, and you’d always wanted to rescue a dog. In Step 2, you could describe the decision criteria you used to select a dog: your apartment only allows dogs under 25 pounds, you wanted a dog with short hair for easier cleanup, you would only travel to a rescue facility within 50 miles of your house, and so on. If you skipped any of the steps above, note that.  Include this outline in your written assignment submission.

• What is your preferred decision-making style?
• How does your style work for you? Are you always satisfied with your decisions?
• What method from the text would you consider for your future decision making?
• How important is decision making in the role of a business leader? Provide an example.

In addition to the text, you are encouraged to research decision-making methods using reliable and properly cited Internet resources. You may also draw from your personal experience with appropriate examples to support your references.

Your written assignment will be graded using the Written Assignment Rubric . Please review and keep it in mind as you prepare your assignment. Each component is weighted as follows:

10% Organization and Format

Adequate: Writing is coherent and logically organized, using a format suitable for the material presented. Transitions used between ideas and paragraphs create coherence. Overall unity of ideas is supported by the format and organization of the material presented.

40% Content

Adequate: All required questions are addressed with thoughtful consideration reflecting both proper use of content terminology and additional original thought. Some additional concepts are presented from properly cited sources, or originated by the author following logic and reasoning they’ve clearly presented throughout the writing.

40% Development – Critical Thinking

Adequate: Content indicates original thinking, cohesive conclusions, and developed ideas with sufficient and firm evidence. Ideas presented are not merely the opinion of the writer, and clearly address all of the questions or requirements asked with evidence presented to support conclusions drawn.

10% Grammar, Mechanics, Style

Adequate: Writing is free of spelling, punctuation, and grammatical errors, allowing the reader to follow ideas clearly. There are no sentence fragments and run-ons. The style of writing, tone, and use of rhetorical devices is presented in a cohesive style that enhances the content of the message.

• Assignment: Your Decision-Making Process. Authored by : Betty Fitte and Lumen Learning. License : CC BY: Attribution

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Business Decision-Making Assignment Sample

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Business Decision Making Assignment Sample Available Here by Experts

What is the business decision.

“Decision is acting as the most crucial factor in any business because it reflects the knowledge and value of the business, and if the person makes no decision, then he makes the worst decision for the business.

In the present world, each organization needs to adopt a competitive environment because of the choices and decision-making capacity of the individuals. Due to this competitive environment, it is very difficult for the organizations to sustain in the market for a long time that too with maintaining their efficacy level. Therefore, to deal with these issues, higher authorities of the management take decisions regarding the growth and development of the organization in the market. Students enrolling in the course of business are taught about the decision-making tricks to enhance the marketing value and face of the organization.

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Decision management is a business administration subject that includes the process of decision-making against the threats in the earnings and capitals of any organization to maximize profits with constant flow. more. Our qualified tutors and top experts at Online Assignment Expert are here to put an end to your worries. Online Assignment Expert holds the distinction of being a credible and reliable one-stop platform for your diverse academic needs. Our tutoring process for the Business decision-making assignment sample is help from our side that will provide you insights into current learning methodologies and the latest inputs on the topic.

Decision-making in business is considered an important task for which every organization and management needs to have a look. It encompasses those decisions that can impact the goals, business operations, and future activities of the organization.

Why it is Crucial to Think Through a Business Decision?

For the proper growth of the business, it is crucial to think through a business decision as it can result in a long-term effect on the success and efficiency of the business. Below are some important examples that indicate why it is important to think about the business decision:

• Enhances profitability: Having thoughts about the business help the person to make a smart and healthy decision that further helps in enhancing the organization's profitability through new products offerings, sales initiatives, revenue structures, and marketing initiatives.
• Influences the organization’s longevity: The potential to think through the business decision can ultimately affect the organization's productivity, and help in adding the success level of the organization.
• Affects activities of successful hiring: The business decision that is connected to the training and hiring activities can positively affect the organization hiring success including higher qualification and the right candidate for the vacant position. This type of environment in the company will also help in increasing retention rates and employee satisfaction.
• Indicates professionalism: Overall, the potential to make the right decision for an organization or business can aid in conveying team professionalism.

What are Tips That Help in Making a Business Decision?

Following are the few tipis that should be considered for preparing good business decisions that will provide benefit to the organization:

• Always consider end-goal
• Weigh the potential of each outcome
• Take advice from the well-qualified employees of the organization and professionals

Explain the Different Types of Business Decisions?

There are various types of business decisions that a professional and business owner can make to facilitate the success of their organization. Some types of business decisions are mentioned below:

• Strategic decision
• Operational decision
• Financial decision
• Hiring decision
• The decision regarding business policy
• The decision regarding the structure of the business
• Technology decision

To peruse a degree in business, it is required for the students to study the above-mentioned different types of a business decisions.

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Business Decision Making

Introduction.

Before complying with the activity like expansion organization need to have to analyze the business in terms of financial aspect. This is because if enterprise would not perform it then in this situation it raises various types of difficulties in front of the organization (Ye, 2008). The whole report is based on the scenario of one restaurant chain which has its operation in UK and has been planning for developing its second chain in London market. This report will provide description regarding the varied type of techniques that can be used by organization with an aim to open its chain in UK market. In addition to this, the report will also showcase different type of technique with the help of which an effective decision can be taken by the enterprise. In addition to this, the report will also showcase the importance of varied type of technique such as standard deviation, quartile and percentile etc. Finally, an effective conclusion regarding whole report will be drawn.

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Plan with respect to collect the primary and secondary data along with presenting the survey methodology and sampling frame used

Restaurant chain that is planning for opening its second chain in London market can collect information regarding the specific market from both means such as secondary and primary data collection method. In order to collect the primary data, corporation can perform survey within the identified market (Glisson and Chowdhury, 2002). With the help of the technique like questionnaire, an effective survey can be performed by the organization. The identified tool is effective because by using this method larger number of London population can be covered by enterprise. In addition to this, with the help of given tool information regarding the tastes and preferences of London customers can be gained by organization. By using this information, restaurant chain can perform changes in its menu and it will leads to it in terms of increased profits and sales. The questionnaire used for the survey purpose will contain combination of both close and open ended questions. In addition to this, before entering into the new market it is being required by the enterprise that is to collect the information regarding the competitors being faced by it in the specific market (Smith and Rupp, 2003). By getting the information regarding the competitors, organization can identified the effectiveness of the food menu being offered by it to its customers. In accordance to the given aspect only corporation can carry out varied changes in its existing menu. However, secondary data can be gathered by enterprises by using the tool like journals, blogs and online articles etc. By using these methods, various type of information can be generated by organization and this leads to it in terms of marking its effective presence in the new market in an effective way. Thus in this regard it can be said that for corporation questionnaire is being considered as the best survey methodology. Here with an aim o carry out the research sample of 35 customers are selected. These are selected by using the method like random sampling (Appelbaum and et. al., 2013).

Collecting the data by designing the questionnaire and giving the justification regarding the questionnaire

Questionnaire for the customers of restaurant.

1. Specify the age where you belong?

• 16 or younger             
• 17-31 years
• 32-41 years
• 42 and more

2. Specify your income?

• Below 10000
• 11000-21000
• 22000-33000
• 34000-44000
• 44000 and more

3. How many times you visit the restaurant?

4. Your preference regarding the food serving?

5. Do you preferred most while visiting the restaurant?

• Dining environment

6. What is your time preference regarding visiting a restaurant?

By using measures of dispersion, assessing the collected data

Measures of dispersion assist corporation in terms of identifying the difference that occurs between central tendency as well as the total unit of population. Measures of dispersion comprise various elements with regard to its calculation. In involves variance, range and standard deviation etc (Pimentel, Kuntz and Elenkov, 2010).  Explanations regarding these elements are being enumerated as below:

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Variance: From the given statistical information it has been identified that for profit figure variance is of 59995.88 and for the sales figure this value is of 54311.11. It assesses the distance between mean and specific sets of data. The variance is of three types such as zero, small variance and large variance. The set of unified value is being depicted by the zero variance. In addition to this, when mean value is very close to the data then it is being called by the name of small variance. However, when mean value is not very close to the data then it is being called by the name of large variance (Byrne, McAllister and Wyatt, 2011).

Range: By using this method variation that occurs between lower and upper limit can be measured by the organization. It is being considered as the effective tool with respect to analyze the consistency of the specific figure. By using this method, restaurant can assess the consistency of its sales and profit figure. For example, if organization has identified that it is consistently earning profits then in this condition, organization can draw the conclusion that it is working in an effective manner. However, if its reverse thing is being assessed by the enterprise then manager should have to make the varied measures with regard to same (Kevin and et. al., 2005). This is being done by it by launching more advertisement and promotions along with performing changes in its existing food menu etc. By complying with all such type of practices corporation can improve its profitability related condition. From the given statistical figure it has been identified that in terms of the sales figure, organization has the range value of 720 million. In the similar way, it has the profit value of 710 million.

Standard deviation: By using this method, population pattern of distribution in the sample size can be assessed by corporation. Moreover, with the help of varied mean figures calculation with respect to identify the standard deviation can be done. This technique has the major purpose that is to identify the dispersion that occurs between total population and statistical mean (Poole and et. al., 2010). From the identified statistical data, varied standard deviation figure is being obtained for both sales and profits figure. For profit value standard deviation is of 244.9 and for the sales value this figure is of 233.

Correlation coefficient

In order to assess the relationship between two varied types of variables, the technique like correlation coefficient is being used. Zero, negative and positive is being regarded as the three major type of correlation coefficient. When the value of one data affects the value of other then it is being called by the name of positive correlation (Morato, 2013). For example, if organization launches advertisement and the given launch of advertisement is increasing the sales figure of corporation then it is being called by the name of positive correlation. In addition to this, when increases an decreases in the value of one variable does not causes necessary impact on the other variable then it is being called by the name of negative correlation.

Operating in such a competitive market it is crucial for top level management of restaurant chain to evaluate and analyze financial aspect of future expansion. However, company’s main aim is to generate high revenue and sustainability to establish its business in the market of London. Furthermore, looking at the demand of food in recent time it can be said that people are spending high money if they are offered with better quality of food. Therefore, it is the duty of senior chef and executives of the restaurant chain to focus on enhancing quality of food so that they can generate high demand regarding its attractive food menu and generate high sales for future contingency. On the other hand, ambiance of the restaurant is another major aspect as people likes clean and hygienic place to eat food. This indicates, management has to indulge proper management of the operation so that they can maintain quality overall.

Decision making is considered as the most significant aspect of an organisation. It is the responsibility of top level management to make accurate and appropriate decisions regarding future functioning of business enterprise. Researcher in the present has focused on using various statistical, financial and graphical tools and techniques by the means of which effective results and outcome can be generated. Therefore, from the above evaluation it can be clearly stated that, restaurant chain should expand its business operation by opening a new restaurant in London. Furthermore, there are several aspects that restaurant’s authority needs to evaluate in order to make appropriate and feasible decisions regarding future functioning such as taste and preferences of customers, clean and hygienic ambiance and quality of food and effective services. Thereafter, report highlights the importance of using investment appraisal techniques because in the present case it has played significant role and helped in evaluating feasible project for expansion for Restaurant Company.

• Glisson, B. W. and Chowdhury, G. G., 2002. Design of a digital dissertation information management system. Program.
• Kevin, K. and et. al., 2005. Workforce and Finances of the United States Anesthesiology Training Programs: 2009–2010. Anesthesia & Analgesia.
• Pimentel, C. R. J., Kuntz, R. J. and Elenkov, S. D., 2010. Ethical decision-making: an integrative model for business practice. European Business Review.
• Poole, R., and et. al., 2010. Managing Records in Global Financial Markets. Ensuring Compliance and Mitigating Risk. Records Management Journal.
• Smith, D. A. and Rupp, T. W., 2003. Strategic online customer decision making: leveraging the transformational power of the Internet. Online Information Review.
• Ye, X., 2008. Property Investment Appraisal (3rd edition). Journal of Property Investment & Finance.
• Haynes, E. M., 2002. Project Management: Practical Tools for Success. Cengage Learning.
• Hofmann, P. K., 2007. Psychology of Decision Making in Economics, Business and Finance. Illustrated.
• Jhonson, A.R., 2009. Statistics: Principles and Methods. 6th ed. John Wiley & Sons.
• Li, S., 2006. Histogram-based Mutual Information Estimation. ProQuest.
• Morato, A. E., 2013. Business Decision Making. Ebooklt.com.
• Rice, A. J. 2007. Mathematical Statistics and Data Analysis. Cengage Learning.
• Simon, L. J., 2000. Developing Decision-making Skills for Business., M.E. Sharpe
• Singh, A., 2007. Information System Management. APH Publishing.

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Assignment on Business Decision Making

Introduction

Business decision making is widely critical process which is find in each and every organisation. This is also known with its alternative name entrepreneur decision making. Decision making is the simple process of electing one action out of available different course of action. Whereas business decision making is a strategic decision which requires utmost care and diligence. This Assignment on Business Decision Making discusses the methods, techniques and tools which are used to process data and derive information which helps in the decision making process of a business. It is seen that business decisions in various fields are the key component in the overall success of an organisation. Mostly these decisions are NON-STRUCTURED in nature so that it is usually taken by top level management. Success and failure of and organisation in today’s competitive market are highly dependent upon the business decision making.

AC 1.1 Create a plan for the collection of primary and secondary data useful to conduct a research that may provide ways to improve sales in your chosen company?

Data is simply a raw material of information. In order to see the full information management has to collect data from different sources. It could be said secret ingredient of information lies within the data collected. Data analysis and design can be qualitative or quantitative and if it has relevance to the purpose then it becomes information (Olsen, 2012). The Marriott can create a short plan in order to collect the data that may provide ways to improve sales.

AC 1.2 Present, a survey methodology and sampling frame that will be most appropriate in your investigation?

• Survey methodology : it is the process of collecting primary and secondary data from the customers in context of their choice of actions and their preference. This is the best method through which genuine data could be collected from different context of people all over the world.
• Sample survey : The Marriot being in hospitality business can take the sample survey in order to decide the preference and expectation of potential consumers (Roepstorff, et. al., 2015).

AC 1.3 Design a questionnaire that you will use to collect primary data for the research

In order to make increment in sale Mariette has to make survey on large as it is easy to tell that collecting data from public at large is not an easy task therefor sample survey is a very useful technique.

Sample questionnaire:-

• Have you ever visited to a Marriott Hotel?
• Yes                                  

       2. What is the best thing you feel after availing hotel services which are offered to you?

• Hotel staff services        
• Ambience and culture
• Swimming pool
• Foods served

       3. Which of the following would you like to avail first if it is being offered to you at free of cost?

• Complementary premium drink
• Spa or head massage
• A game in golf court

 4. How will you rate our hotel as per the services you have availed in business?

       5. What are the core services you like most in our hotel?

• Food services
• Housekeeping services
• Luxurious services
• Accommodation services
• Pick and drop services

       6. Which type of Food do you prefer most in our hotel?

• Vegetarian Food
• Continental Food
• Non-vegetarian Food

       7. How often would you like to visit out hotel?

• Never(De Bruijne & Wijnant 2014)

       8. Which are the best things you see in our hotel?

• 2. Ambience
• 3. Services
• 4. Corporative behavior

       9. what is the most appropriate mean you use for booking room in our hotel?

• 1 Directly with the front house of the hotel
• 2 Through our hotel app
• 4 Tours and travel agency

       10. Where does u come to know about our hotel?

• 1. Travel advice portal
• 2. Online advertisement
• 3. from agent
• 4. Some other places

       11. What would be your feedback with our hotel services you availed in our hotel?

• 4. Not Satisfactory

       12. In which part of the hotel would you like to make changes in our hotel services?

• 1. Room services
• 2. Accommodation services
• 3. Tours and travel services
• 4. Bars and roof top pool services

       13. Where do you rank our hotel services provided to you in last visit?

       14. In which manner you would prefer us to connect with you?

• 1. Phone Call
• 4. via Social Network

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Task 2- Part A: Calculations and graph production (evidence for AC 3.3)

Ac 2.1 creation of information using representative values.

The sales commission of 20 employees of ALF & Sons Ltd. in £ for the month of Decemberis as follows:

Calculation of mean

Mean = Average value of the data             = £1091.7

Calculation of Median

Median = Middle value of the data             = £1129.5

Calculation of Mode

Mode = the value from the data which is having the highest frequency             = Not Applicable

Since all the values of the data are discrete and none of them is being repeated, therefore mode cannot be calculated for the sales planning commission of employees. (Garcia, 2014)

AC 2.2 Analysis of results obtained in AC 2.1 for decision making

The data related to the sales commission of twenty employees of Alf & Sons Ltd for the month of December. The mean of the data so calculated comes out to be £1091.7. This means that the average commission payable to the employees by the company is £1091.7. The median of the data so calculated comes out to be £1129.5 which means that when the values of sales commission of the employees will be arranged in ascending order the most middle value will be £1129.5. On calculation of mode it was observed that figures of sales commission of all the twenty employees are different. No value is being repeated. Since mode represents the value of sales commission that has arrived maximum number of times therefore, mode could not be ascertained for the discrete data. (Merkova, 2013)

AC 2.3 Calculation of Standard Deviation and its usefulness

The profit figures and sales for the past ten years of Alf & Sons Ltd are as follows:

Standard Deviation:  It is measure of dispersion which is used to quantify the variation or dispersion of the data values or a range of data values. When standard deviation is low it means that the data is likely to be close to the mean of the data whereas when standard deviation is high it means that the data is far away from the mean. It is useful for the analysis of the data as it is capable to measure the exact value of dispersion in the same units as the units of data is. As a result of measurement of variation, the confidence in the statistical value calculation can be achieved. The standard deviation of sales figures of the company for past ten years is 53.30 and the standard deviation of profit figures of the company is 54. 07. The high standard deviation of the profits and sales of the company suggest that the mean is wider from the data.

AC 2.4 Calculate the quartiles, percentiles and correlation coefficient of profit and sales figures

Calculation of quartiles

Calculation of Percentiles

Calculation of Correlation Coefficient

Correlation coefficient 0.878495215

Usefulness of quartiles percentiles and correlation coefficient:  The quartiles, percentiles and correlation coefficient are the measures of dispersion which are used to measure the variation and dispersion of the statistical calculations and help the analyst to gain the confidence about the results of the calculations with quantification of likely variations. The quartiles and percentiles are used to evaluate the quantitative data whereas the correlation is used to evaluate the qualitative aspects of data and operational efficiency. (Francis, 2016)

AC 3.1 Production of graphs

The profit generated by the company Alf & Sons Ltd. by making of cars in the year 2015 is as follows:

It can be observed that the company has generated maximum profits from the sale of Mercedes Benz and BMW cars whereas the sale of Range Rover and Golf cars have resulted in minimum profits out of the five cars.

It can be observed that the sales and profits are fluctuating during the period of ten years but both the lines in the same direction suggest that the increase in sales has resulted in increase of profits correspondingly for all the ten years. Although the change in the figures is not at same rate since the correlation between the two values is not perfect although positive. (Forkman, 2012)

Scatter Chart

AC 3.2 Creation of trend line in scatter graph and obtaining linear equation of the line fitted on scatter graph to forecast profit for an estimated sale of £ 400,000.

The linear equation obtained from the scatter graph representing the figures of profit and sales of past ten years of the company is as follows:

Linear Equation y = 0.891x - 74.04

Where, y represents profits of the company and x represent sales. The forecast of profit of the company at estimated sales of £ 400,000 can be made with the help of this linear equation as follows:

Profit (y) = 0.891(400) – 74.4 y = 282

These states at for the sales of £ 400,000, the company will earn profits of £ 282,000. The increase in profit is 0.7% and the change in profit is 14%. (Muntean, 2010)

AC 3.3 Preparation of Business Presentation

AC 3.4 Formal Business Report

To The Management Alf & Sons Ltd. Date – 1 st July, 2016

Subject – To provide information assisting in analysis of data to support sales promotion.

This report is based on the calculations and analysis made from the data provided by the management about the sales commission of twenty employees of the company for the month of December, profit and sales figures for the past ten years and profit generated by the company by making of five cars in the year 2015. The calculations and analysis have been made using computer generated software’s and information processing tools.

The results of the calculations show that the average commission payable by the company to its employees skills is £1091.7. The standard deviation used as the measure of dispersion for the data related to profit and sales of company during past ten years is 54 and 53 respectively which shows that the statistical calculations from the data related to these figures is likely to be in variance with the mean. There is positive correlation between profit and sales with a correlation coefficient of 0.88. Out of the five cars made by the company in the year 2015, maximum profits were earned from the making of cars Mercedes Benz and BMW whereas minimum profits were earned from Golf and Range Rover cars. The linear equation obtained from the scatter graph of [profit and sales suggest that the forecasted profit at an estimated sales of £ 400,000 is £ 282,000 which is an increase of 0.7 % as compared to the increase of sales by 14% from last year.

Conclusion and recommendations

Thus it can be concluded that the company needs to focus on increase of sales of Mercedes Benz and BMW cars while planning its sales promotional activities. Although there is positive correlation between sales and profit but the efforts shall be made to make them perfectly correlated so that the increase in sales may result in increase of corresponding profit. The average commission is £1091.7 whereas the highest sales commission is £1230 paid by the company during the month of December. Therefore efforts shall be made to motivate the employees increase their sales commission through increase of sales of cars.

Regards Consultant

Task 4: Prepare a project plan

Ac 4.1 preparation of project plan using network diagram and determination of critical path..

The business plan of the company to Alf & Sons to launch a new car part includes the following series of activities:

The network diagram of the given series of activities is as follows:

The various paths of the project as contained in network diagram are as follows:

Critical Path

The path of the project which has the highest duration is known as the critical path regardless of whether it has a float or not. It is used to determine the minimum time possible for the completion of the project. It is used for the determination of project plan and its presentation in the form of diagram.

AC 4.2 Calculation of NPV and IRR. Reporting on the financial viability of project options and advising on which option to channel the investment.

The company Alf & sons Ltd has to options for its investment as part of launch of new car part. The company has obtained two quotes for the options viz. ABC system has initial cost of equipment and installation of £1 million and XYZ solutions Ltd having initial cost of equipment and installation of £1.5 million. The cost of capital of company is 5%. The projected cash flows of the two options from new production line are as follows:

• Net Present Value:  It refers to as the difference between present value of Cash inflows and present value of cash outflows for a project in which the present value ions discounted cash flow at the cost of capital which is the discounting rate for the project. The project having a positive NPV is considered as profitable whereas the project having negative NPV is considered as loss making project. It is a method or tool used to evaluate the financial efficiency of a project.
• Internal Rate of Return:  It is the rate of return at which the present value of cash inflows of a project is equal to the present value of cash flows other words this rate is the rate which makes the Net Present Value of a project equals to zero if the cash inflows and cash outflows are discounted at this rate to calculate the Net Present Value. Outflows of a project. It is used in capital budgeting decisions to evaluate the profitability of projects having investment potential. The return so calculated is based on the consideration of cash flows only and the environmental factors and other factors affecting the projects are ignored. It is also known as Economic Rate of Return (ERR) because of this reason. (Enrique, 2011)
• Financial viability of project:  The net present values of both the projects are positive which means that the projects are capable of generating the cash inflows higher than the cash outflows during the five years. The Internal Rate of Return for the project to be done by ABC systems is 25% and the internal rate of return of project of XYZ Solutions is 15%. Since the projects have higher internal rate of returns therefore both the projects have the potential for generating high returns for the new production line to be launched by the company. Thus, it can be concluded that the project is financially viable since the net present value under both the options is positive and the internal rate of return under both the options is higher than the cost of capital.
• Decision:  The higher the Net Present Value, the better is the project and similarly the option of project with higher Internal Rate of Return shall be selected. The net present value of ABC systems is higher than the net present value of XYZ Solutions by £203,080. Therefore on the basis of NPV method Option A is better. Similarly the Internal Rate of Return of Option A is higher than Option B by 10%; therefore Option A is better on the basis of internal Rate of Return. Thus the company Alf & sons is advised to undertake Option A which is quotations received from ABC Systems. Also the initial investment is less in Option A under which cost of equipment and installations quoted by ABC systems is £ 1.5 million. (Canco, 2014)

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Business strategy is concerned with long term decision. It is mostly taken by top level department. Usually these decisions are non-structured in nature. Business strategy is critical in nature and highly dependent upon the information collected from various concerned fields I have  studied all the information  given in this Assignment on Business Decision Making and this has helped me very much in order to come with the conclusion that business strategy is the key pillar in performance of organization’s activities.

Canco, I. 2014, "THE IMPACT OF THE DECISION-MAKING METHOD IN BUSINESS ACHIEVEMENTS", European Scientific Journal,  vol. 10, no. 7, pp. 37. De Bruijne, M. & Wijnant, A. 2014, "Improving Response Rates and Questionnaire Design for Mobile Web Surveys", Public Opinion Quarterly,  vol. 78, no. 4, pp. 951-962. Enrique Benjamín Franklin Fincowsky 2011, "Business making decisions",  Contabilidad y Negocios : Revista del Departamento Académico de Ciencias Administrativas,  vol. 6, no. 11, pp. 113-120. Forkmann, S., Wang, D., Henneberg, S.C., Naudé, P. & Sutcliffe, A. 2012, "Strategic decision making in business relationships: A dyadic agent-based simulation approach", Industrial Marketing Management,  vol. 41, no. 5, pp. 816. Francis, R.D., Murfey, G. & eBook Library (EBL) 2016, Global business ethics: responsible decision making in an international context,  Kogan Page Limited, London;Philadelphia; García-Peñalvo, F.J. & Conde, M.Á. 2014, "Using informal learning for business decision making and knowledge management",  Journal of Business Research,  vol. 67, no. 5, pp. 686-691. Merková, M., Drábek, J. & Jela?i?, D. 2013, "Application of Risk Analysis in Business Investment Decision-Making", Drvna industrija,  vol. 64, no. 4, pp. 313-322. MUNTEAN, C. & MUNTEAN, M. 2010, "Multicriterial Methods used in Expert Systems for Business Decision Making",  Informatica Economica Journal,  vol. 14, no. 3, pp. 199-205. Olsen, W. 2012;2011;,  Data collection: key debates and methods in social research,  SAGE Publications, Thousand Oaks, CA.

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Preparation of primary and secondary data: Primary data: Primary data of Kellogg India Ltd. is collected from the primary sources like company own databases, company surverys, interviews. The data which are collected by thoe own researchers source or primary source is known as primary data(Dawes, 1971). The company generally gather its primary data from the existing customer perspective. Besides company accountant information regarding survey plays vital role in this case. Kellogg India Ltd. empahasizes more on primary sources than on the secondary sources of data.

They use direct observatons, personal interview from customer as their primary data sources. Secondary data: Secondary data are the subsequent publication of primary literature(Kahnmean and Lovallo, 1993). The data sources from the third parties not company internal sources is used as secondary data to use in research by Kellogg India Ltd. external books and services like Journals, internal, printed sources etc. are increasingly used as secondary data.. But according to this case study, Kellog India Ltd. give less importance on secondary data and secondary sources of data to make this survey.

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As secondary data are less reliable to use, so companies are most probably trying to avoid secondary data to use in any research report. From that perspective, Kellogg India Ltd. use primary data which are more relevant, reliable and satifactory to use in research. Implementation of plan: Collect data: The stage appears to us the avaiable data collection by Kellogg India ltd. for the purpose of making the research and in this case the primary and secondary sources are intensely evaluated to ge the perfect and required data from available resources. So data collection is important here.

Analyze data: Data analyzatlon represents wnetner data are relevent to tne researcn or not. 10 PICK the perfect data, data analyzation is required by the reserchers which is successfully done Kellogg India Ltd. Evaluate data: Data evaluation is important to make the reaserach because without evaluaiton relevent data can not be obtained and Kellogg India Ltd. did that for the sake of finding out their failure and make the research of the sustainble custormer and one time buyer. Filter data: Data filter is the optional requriment which adds some extra importance to make the report.

In this case study, we have seen the way of filtering data from the perspective of two years comparison. They mentioned about their growth from 1995 to 2000. So they skip the interval data which has less importance to make this report. Using data: Final stage requres using most relevant data and apporpriate data for making the survey. This proper data utilization allows any researcher to make out their overall profit and loss from different perspective and allow them to analyze. Kellogg India Ltd. thus get their mistakes and accordingly they penetrate the indian market in most flexible way. . Description and Justification of Survey methodology and frame: The survey data collection techniques and strategies that are widely used to define the way of doing a survey are known as survey methodology(Gigerenzer, Hoffrage, & Kleinb?¶lting, 1991). The common methods used in different survey to get the opinion of population are Telephone, Online surveys, and mail, Personal mail and street intercept survey, personal in-home surveys and hybrids of the above. According to the case study of Kellogs, we can see that the methodology they used in a mixed way.

No specific survey methodology is not used by Kelloggs India Ltd. n that case study; we found that out of 100 customers, 2 of them are regular buyers. So this is personal in-home surveys used by the company. Personal in-home surveys are vital survey methodology through which data are collected from the individual customer operated in the own company research center. Kelloggs Company used this survey methodology without the knowledge of any buyer which allows them to get a positive research 1. 3 Questionnaire used by Kelloggs India Ltd. : Kellogs India Ltd. ade this research most probably on the basis of Category questions, rating questions, ranking questions, open and list questions. But here the uestioner categorized on their design: Please help us to mention your process of getting your concerns resolved was: 1 . Very bad 2. Unsatisfactory 3. Average 4. Satisfactory 5. Superior quality How often our product is used by you: 1. Regularly 2. Once a week 3. 3 times a month 4. once In a montn Most impressing option inspire you to buy our product: 1. Price 2. Quality 3. Durability 4. Customer support 5.

Easy shopping experience Would you use our product in future? 1. Of course 2. Possibly 3. Not sure 4. Probably not 5. Off course not Will you refer our product to your kith and kin or other people; 1 . Sure 2. Not sure 3. May be 4. Definitely not Mention why you choose the product? Mention why you don’t choose the product? Justification of questionnaire design: To make any customer satisfaction survey, some important issues have to be considered through which overall questionnaire will be made that goes with design (Kahneman & Lovallo, 1993).

First one is restrictive multiple choices that allows a customer to share his/her feelings via different options. Here category questions consists of different multiple answers. So it is used by Kelloggs India Ltd… Open ended questions allow customer to put the answer what is in his mind and not in the ist. So this design is widely used by the company. Kelloggs India Ltd. if single answer of question in the feedback of every customer survey is given completely and thoughtfully then it will be great options. Kellgo India Ltd.

Just did that to find out the number of their regular customers and their failure percentage. Kellgo India Ltd. also make that questionnaires design in way so that the mistakes from their operation and product distribution can easily be assumed and evaluated. 2. 1: summarizing data: This summary will compress long statements into briefer statements in which the ain sense of what has been said or observed is rephrased in a few words. Through summarizing qualitative and quantitative data, it will be very easy to draw a perfect decision to make(Slovic and Fischhoff, 1977). Selections are not stated in a vacuum!

Gather, collate, classify along with prepare the info you should make a decision. You have to analyze along with consider all the key elements with choosing. Study different elements active in the issue along with discover the important thing versions. Identify Just about any vital elements upon which your success around the determination will probably hinge. Sound away your opinions along with ideas of other folks: they might see anything you have missed. The data we get from the case study can be summarized as below: Kellogg India Ltd. is a producer of crispy flakes which is worldwide popular.

The main problem of this company, it is not become conslstent wlt n tne emerging Inalan market Oue to Its culture. But latter It gradually it became to sustain in the Indian market with innovative product and the marketing strategy applied by the organization. First stage it only have 2% customer but at last it gained huge amount of profit during in compare to its previous session. By coordinating qualitative and quantitative data, it has gained success to make an overall survey in the Indian market and it did a good combination of its customer for which it became to be able to sustain in Indian market. 2. Results from the summarizing data: To the best of our knowledge, there currently do not exist light-weight data analysis methods that can be easily used for summary purposes. Instead, for bi-nary data the standard approach is to mine for frequent item set, the result of which quickly grows up to many times the size of the original data (Benartzi and Thaler, 2007).. Resulting, many proposals exist that focus on summarizing sets of frequent patterns. That is, to choose groups of representative item sets such that the information in the complete pattern set is maintained as well as possible Kellog Indian Ltd. survey on the customer of Indian market help it out to find out its weakness and its opportunity in the Indian market. The result it got from summarizing data is varied with their increasing tendency to enter the market and their opportunity prevails in the market. So the company can easily find out the summary of whole market. Their failure and heir mistakes of decision making will be easily identified and assumed through the survey of the case study. By assuming the problem, they are also successful to identify the probable solution raise to enter the Indian market.

Ultimately their profits increase so high that it takes time to penetrate and market and occupy a buyer portion by sustaining them with from 2% to 60% above. The results from the survey through summarizing data are really effective and it shows the way to achieve success in that market (Fischhoff, 1982). 2. 3 Measures of dispersion: Measures of dispersion measure how spread out a set of data is. The formulae for he measures of dispersion are mentioned below. m means the mean of the original data. The standard deviation, s, is the square root of the variance.

Variance = s2 = S (xr – m)2 Exactly what your system signifies: (1) xr mirielle signifies consider Just about every worth subsequently subtracting indicate coming from Just about every worth. (2) (xr m)2 signifies block every one of the benefits extracted from stage (1). It is to lose any kind of fewer signals. (3) S(xr m)2 signifies add together the many benefits extracted from stage (2). (4) Divide stage (3) through n, that’s the volume of quantities (5) For your typical change, block actual better solution for you to stage (4 Observe a lot.

The results got from analyzing measures of dispersion are very satisfactory from the present context of the company. 4 quartlles, percentiles, correlation coemclent Quartiles: Dividing the list of numbers into the quarters and the derived value is known as quartiles. 3 quartiles are the general value like first quartile, median and third quartile. The derived quartiles of Kellogg India Ltd. are favorable for the company to carry on the business. Percentile A percentile is often a measure which explains to us exactly what percent in the omplete consistency scored at or maybe below which measure.

A new percentile position is the percentage associated with results which drop at or maybe below settled report. Correlation coefficient The quantity 3rd there r, referred to as this linear relationship coefficient, methods this toughness and also this path of your linear connection between a couple variables. Your linear relationship coefficient may also be referred to as this Pearson solution instant relationship coefficient throughout recognize of the Karl Pearson. 3. 1 Using data from kellogg’s business scenario, preparation a range of graphs Total product sold of Kellogg India Ltd. 100,Regular buyers : 2, First time buyers: 98 Share increases 5% than in 2000 3. 2: Use trend lines in spreadsheet graphs 3. 3 The answer is delivered through attached Microsoft PowerPoint document. 3. 4 Formal Business Report: Overview: Kellogg Company, with its global headquarters in Battle Creek, Michigan, USA, is the world’s leading cereal company, and a major producer of convenience foods. It markets more than 1,500 products in over 180 countries all over the world. Founded in 1906, with a commitment to nutrition, Kellogg Company has always been focusing on its products and processes.

Today, with more than 100 ready-to-eat cereals around the world, consumers count on Kellogg for providing great-tasting, convenient and healthy food choices that meet their nutrition needs. own researchers source or primary source is known as primary data(Larrick, 2004; Lerner & Tetlock, 1999). The company generally gather its primary data from the existing customer perspective. Secondary data: Secondary data are the subsequent publication of primary literature. The data sources from the third parties not company internal sources is used as secondary data to use In researcn Dy Kellogg Inala Ltd. xternal DooKs ana servlces Ilke Journals, nternal, printed sources etc. are increasingly used as secondary data. Operational level tools: Daily activities regarding maintaining schedules, specifications, costs are regulated and served by operational control. Kellogg India Ltd. can get efficiency in operational level strategy through the answers of some relevant questions working as tools. Strategic level tools: Strategic supervision delivers total way for the venture. Strategy ingredients needs looking at in which the organization is actually, finding out wherever it wants to proceed, after which it finding out ways to get there.

Strategic evaluation entails accomplishing a 4. Management information system: Managemetn infromation system is the term used to manage with the help of computer and internet tools. Management information system is used to expaing the operational, tactical and strategic level of management which are ingrate analysis part of a company (Moore and Loewenstein, 2004). Five basic components- hardware, software, data, people and procedures helps organization to achive the different level strategy and techniques. The use of MIS is suggested for the Kellogg India Ltd. or achiving for efficency and effictiveness to produce the product by minimizing cost. MIS allows Kellogg India Ltd. o acieve efficicency fro the following perspectives: Companies strength, weaknesses, opportunity and threats are the result of annual reports, performance record etc… That helps to improve the business operations and processes of the company. This is also play role as planning and communication tool through providing tan overall picture of the company. By evaluating the customer demand and needs, their feedback and data helps a company to distinguish among the company internal applications.

Direct marketing and promotion activities also facilitates with the proper application of the term. Competitive advantage is a very mportant term with is not easy to achieve for any company. But management information system here comes to help the company to use of the best use of competitive advantage(Cooper, Woo, and Dunkelberg, 1988).. For a company, competitive advantage helps to compete with the competitors in most efficient way. Following enterprise applications can help a Kelogg India Ltd. o perform the company internal and external activities: Enterprise resource planning is one of the major applications widely used to manage, plan and control the core business processes via combination of integrated software modules and organized databases. Production, inventory management, distribution, resource, planning, organizing, coordination, staffing are the proper sphere of applying this module. Three levels of tools recommended: level of controls Operational level tools: level strategy through the answers of some relevant questions working as tools.

It the product is proper quality and scheduled as usual? The answer of this question regarding a company product determines the operation level skill and the acceptance to customer. Product quality and schedule maintaining the overall operations level activity and the ability to perform task according to that (Stnlv ana I-eaorKlnn, 1 Are tne Daslc elements 0T operatlons properly usea ana product is produced according to that? Three basic process of operations level activity are highly recommended for Kellogg India Ltd known to all. They are collection of raw materials, good-in-process and finished product.

Operations of producing a product are highly required above operations to gain the ultimate finished product more efficiently. Are the energy resource of operations are utilized in an effective manner? Kellogg India Ltd. enter the market with good quality good but still got great crush due to not understanding the nature of resource used in its roduct. They add element which is good for health but not popular in India. So they failed to understand the market. Tactical level tools: The actual and primary steps required to obtain the objectives with the involvement of business core competences are referred to tactical control.

Tactics are practical step with e-commerce solution required to implement the strategy (Milkman, Rogers and Bazerman, 2008). It is the basic MIS components that have wide applications via computers software and internet. Some tactics for production-level Company: Building a relationship with the country culture: he culture of a country is very crucial while new company is going to operate in that country. Kellogg India Ltd. fails to understand the culture of India and that’s why inspired of being a good quality product, they failed in their first stage. So for any Kelllogg India Ltd. it is highly recommended to understand and practice the culture where they are going to operate their business. Prepare a business incentive scheme: Business incentive is mainly for the local employees over which company can have a control to carry on. The company must handle this by application of tactics with ffective but simple tips. proceed, after which it finding out ways to get there(Sunstein and Thaler, 2003).. Strategic evaluation entails accomplishing a situation analysis, self-evaluation and competition analysis–internal and exterior, micro-environmental and macro- environmental.

Contingency using this type of evaluation, aims tend to be collection. These types of aims need to be parallel to some timeline; a number of come in the actual short-term and others on the long-term. This implies making eyesight assertions (long time period watch of your doable future), quest assertions (the part hich the firm offers by itself in society), total company aims (both economic and strategic), strategic business unit aims (both economic and strategic), and tactical aims. 4. 2Presentation of a project plan for the Kellogg’s case study for an activity through Gantt chart and critical path: 4. 1nternal rate 0T return: The internal price connected with return (IRR) or economical price connected with return (ERR) is a price connected with return used in capital spending budget to be able to measure and also evaluate the success connected with assets (Ritov and Baron, 1992). It is also termed the discounted profit price connected with return DCFROR) or the price connected with return (ROR). Within the wording connected with cost savings and also financial loans the IRR is usually termed the efficient rate of interest.

The term inside describes the truth that it’s working out will not add the environmental aspects (Gary the gadget guy. , the eye price or inflation). Referrences 1 . Dawes, R. M. (1971). A case study of graduate admissions: Application of three principles of human decision making. American Psychologist, 26(2), 180-188. 2. Kahneman, D. , & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on risk and risk taking. Management Science, 39, 17-31 3. Slovic, P. & Fischhoff, B. (1977). On the psychology of experimental surprises.

Journal of Experimental Psychology: Human Perception and Performance, 3, 544-551 : 23, 31 . 4. Fischhoff, B. (1982). Debiasing. In D. Kahneman, P. Slovic, & A. Tversky (Eds. ), Judgment Under Uncertainty: Heuristics and Biases. Cambridge: Cambridge University Press: 422 – 444. 5. Moore, D. , & Lowenstein, G. (2004). Self-interest, automaticity, and the psychology of conflict of interest. Social Justice Research, 17(2), 189-202. 6. Milkman, K. L. , Rogers, T. , & Bazerman, M. (2008). Highbrow films gather dust: A study of ynamic inconsistency and online DVD rentals.

HBS Working Paper 07-099. 7. Milkman, K. L. , Rogers, T. , & Bazerman, M. (in press). Harnessing our inner angels and demons: What we have learned about want/should conflict and how that knowledge can help us reduce short-sighted decision making. Perspectives on Psychological Science. 8. Sunstein, C. R. & Thaler, R. H (2003). Libertarian paternalism is not an oxymoron. University of Chicago Law Review, 70 (Fall), 1 159-99. 9. Ritov, 1. , & Baron, J. (1992). Status-quo and omission biases. Journal of Risk & Uncertainty, 5(1), 49-61. 10. Benartzi, S. , & Thaler, R. H. (2007).

Heuristics and biases in retirement savings behavior. Journal of Economic Perspectives, 21(3), 81-104. 1 1 . Cooper, A. C. , Woo, C. Y. , & Dunkelberg, W. C. (1988). Entrepreneurs’ perceived chances for success. Journal of Business Venturing, 3(2), 97-109. 12. Larrick, R. P. (2004). Debiasing. In D. J. Koehler & N. Harvey (Eds. ), Blackwell Handbook of Judgment and Decision Making. Oxford, England: Blackwell Publishers. 13. Savitsky, K. , Van Boven, L. , Epley, N. , & Wight, W. (2005). The unpacking effect in responsibility allocations for group tasks. Journal of Experimental Soclal Psycnology, 4

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What is decision making?

Decisions, decisions. When was the last time you struggled with a choice? Maybe it was this morning, when you decided to hit the snooze button—again. Perhaps it was at a restaurant, with a miles-long menu and the server standing over you. Or maybe it was when you left your closet in a shambles after trying on seven different outfits before a big presentation. Often, making a decision—even a seemingly simple one—can be difficult. And people will go to great lengths—and pay serious sums of money—to avoid having to make a choice. The expensive tasting menu at the restaurant, for example. Or limiting your closet choices to black turtlenecks, à la Steve Jobs.

Get to know and directly engage with senior McKinsey experts on decision making

Aaron De Smet is a senior partner in McKinsey’s New Jersey office, Eileen Kelly Rinaudo  is McKinsey’s global director of advancing women executives and is based in the New York office, Frithjof Lund is a senior partner in the Oslo office, and Leigh Weiss is a senior adviser in the Boston office.

If you’ve ever wrestled with a decision at work, you’re definitely not alone. According to McKinsey research, executives spend a significant portion of their time— nearly 40 percent , on average—making decisions. Worse, they believe most of that time is poorly used. People struggle with decisions so much so that we actually get exhausted from having to decide too much, a phenomenon called decision fatigue.

But decision fatigue isn’t the only cost of ineffective decision making. According to a McKinsey survey of more than 1,200 global business leaders, inefficient decision making costs a typical Fortune 500 company 530,000 days  of managers’ time each year, equivalent to about $250 million in annual wages. That’s a lot of turtlenecks.

How can business leaders ease the burden of decision making and put this time and money to better use? Read on to learn the ins and outs of smart decision making—and how to put it to work.

Learn more about our People & Organizational Performance Practice .

How can organizations untangle ineffective decision-making processes?

McKinsey research has shown that agile is the ultimate solution for many organizations looking to streamline their decision making . Agile organizations are more likely to put decision making in the right hands, are faster at reacting to (or anticipating) shifts in the business environment, and often attract top talent who prefer working at companies with greater empowerment and fewer layers of management.

For organizations looking to become more agile, it’s possible to quickly boost decision-making efficiency by categorizing the type of decision to be made and adjusting the approach accordingly. In the next section, we review three types of decision making and how to optimize the process for each.

What are three keys to faster, better decisions?

Business leaders today have access to more sophisticated data than ever before. But it hasn’t necessarily made decision making any easier. For one thing, organizational dynamics—such as unclear roles, overreliance on consensus, and death by committee—can get in the way of straightforward decision making. And more data often means more decisions to be taken, which can become too much for one person, team, or department. This can make it more difficult for leaders to cleanly delegate, which in turn can lead to a decline in productivity.

Leaders are growing increasingly frustrated with broken decision-making processes, slow deliberations, and uneven decision-making outcomes. Fewer than half  of the 1,200 respondents of a McKinsey survey report that decisions are timely, and 61 percent say that at least half the time they spend making decisions is ineffective.

What’s the solution? According to McKinsey research, effective solutions center around categorizing decision types and organizing different processes to support each type. Further, each decision category should be assigned its own practice—stimulating debate, for example, or empowering employees—to yield improvements in effectiveness.

Here are the three decision categories  that matter most to senior leaders, and the standout practice that makes the biggest difference for each type of decision.

• Big-bet decisions are infrequent but high risk, such as acquisitions. These decisions carry the potential to shape the future of the company, and as a result are generally made by top leaders and the board. Spurring productive debate by assigning someone to argue the case for and against a potential decision can improve big-bet decision making.
• Cross-cutting decisions, such as pricing, can be frequent and high risk. These are usually made by business unit heads, in cross-functional forums as part of a collaborative process. These types of decisions can be improved by doubling down on process refinement. The ideal process should be one that helps clarify objectives, measures, and targets.
• Delegated decisions are frequent but low risk and are handled by an individual or working team with some input from others. Delegated decision making can be improved by ensuring that the responsibility for the decision is firmly in the hands of those closest to the work. This approach also enhances engagement and accountability.

In addition, business leaders can take the following four actions to help sustain rapid decision making :

• Focus on the game-changing decisions, ones that will help an organization create value and serve its purpose.
• Convene only necessary meetings, and eliminate lengthy reports. Turn unnecessary meetings into emails, and watch productivity bloom. For necessary meetings, provide short, well-prepared prereads to aid in decision making.
• Clarify the roles of decision makers and other voices. Who has a vote, and who has a voice?
• Push decision-making authority to the front line—and tolerate mistakes.

Introducing McKinsey Explainers : Direct answers to complex questions

How can business leaders effectively delegate decision making.

Business is more complex and dynamic than ever, meaning business leaders are faced with needing to make more decisions in less time. Decision making takes up an inordinate amount of management’s time—up to 70 percent for some executives—which leads to inefficiencies and opportunity costs.

As discussed above, organizations should treat different types of decisions differently . Decisions should be classified  according to their frequency, risk, and importance. Delegated decisions are the most mysterious for many organizations: they are the most frequent, and yet the least understood. Only about a quarter of survey respondents  report that their organizations make high-quality and speedy delegated decisions. And yet delegated decisions, because they happen so often, can have a big impact on organizational culture.

The key to better delegated decisions is to empower employees by giving them the authority and confidence to act. That means not simply telling employees which decisions they can or can’t make; it means giving employees the tools they need to make high-quality decisions and the right level of guidance as they do so.

Here’s how to support delegation and employee empowerment:

• Ensure that your organization has a well-defined, universally understood strategy. When the strategic intent of an organization is clear, empowerment is much easier because it allows teams to pull in the same direction.
• Clearly define roles and responsibilities. At the foundation of all empowerment efforts is a clear understanding of who is responsible for what, including who has input and who doesn’t.
• Invest in capability building (and coaching) up front. To help managers spend meaningful coaching time, organizations should also invest in managers’ leadership skills.
• Build an empowerment-oriented culture. Leaders should role model mindsets that promote empowerment, and managers should build the coaching skills they want to see. Managers and employees, in particular, will need to get comfortable with failure as a necessary step to success.
• Decide when to get involved. Managers should spend effort up front to decide what is worth their focused attention. They should know when it’s appropriate to provide close guidance and when not to.

How can you guard against bias in decision making?

Cognitive bias is real. We all fall prey, no matter how we try to guard ourselves against it. And cognitive and organizational bias undermines good decision making, whether you’re choosing what to have for lunch or whether to put in a bid to acquire another company.

Here are some of the most common cognitive biases and strategies for how to avoid them:

• Confirmation bias. Often, when we already believe something, our minds seek out information to support that belief—whether or not it is actually true. Confirmation bias  involves overweighting evidence that supports our belief, underweighting evidence against our belief, or even failing to search impartially for evidence in the first place. Confirmation bias is one of the most common traps organizational decision makers fall into. One famous—and painful—example of confirmation bias is when Blockbuster passed up the opportunity  to buy a fledgling Netflix for $50 million in 2000. (Actually, that’s putting it politely. Netflix executives remember being “laughed out” of Blockbuster’s offices.) Fresh off the dot-com bubble burst of 2000, Blockbuster executives likely concluded that Netflix had approached them out of desperation—not that Netflix actually had a baby unicorn on its hands.
• Herd mentality. First observed by Charles Mackay in his 1841 study of crowd psychology, herd mentality happens when information that’s available to the group is determined to be more useful than privately held knowledge. Individuals buy into this bias because there’s safety in the herd. But ignoring competing viewpoints might ultimately be costly. To counter this, try a teardown exercise , wherein two teams use scenarios, advanced analytics, and role-playing to identify how a herd might react to a decision, and to ensure they can refute public perceptions.
• Sunk-cost fallacy. Executives frequently hold onto underperforming business units or projects because of emotional or legacy attachment . Equally, business leaders hate shutting projects down . This, researchers say, is due to the ingrained belief that if everyone works hard enough, anything can be turned into gold. McKinsey research indicates two techniques for understanding when to hold on and when to let go. First, change the burden of proof from why an asset should be cut to why it should be retained. Next, categorize business investments according to whether they should be grown, maintained, or disposed of—and follow clearly differentiated investment rules  for each group.
• Ignoring unpleasant information. Researchers call this the “ostrich effect”—when people figuratively bury their heads in the sand , ignoring information that will make their lives more difficult. One study, for example, found that investors were more likely to check the value of their portfolios when the markets overall were rising, and less likely to do so when the markets were flat or falling. One way to help get around this is to engage in a readout process, where individuals or teams summarize discussions as they happen. This increases the likelihood that everyone leaves a meeting with the same understanding of what was said.
• Halo effect. Important personal and professional choices are frequently affected by people’s tendency to make specific judgments based on general impressions . Humans are tempted to use simple mental frames to understand complicated ideas, which means we frequently draw conclusions faster than we should. The halo effect is particularly common in hiring decisions. To avoid this bias, structured interviews can help mitigate the essentializing tendency. When candidates are measured against indicators, intuition is less likely to play a role.

For more common biases and how to beat them, check out McKinsey’s Bias Busters Collection .

Learn more about Strategy & Corporate Finance consulting  at McKinsey—and check out job opportunities related to decision making if you’re interested in working at McKinsey.

Articles referenced include:

• “ Bias busters: When the crowd isn’t necessarily wise ,” McKinsey Quarterly , May 23, 2022, Eileen Kelly Rinaudo , Tim Koller , and Derek Schatz
• “ Boards and decision making ,” April 8, 2021, Aaron De Smet , Frithjof Lund , Suzanne Nimocks, and Leigh Weiss
• “ To unlock better decision making, plan better meetings ,” November 9, 2020, Aaron De Smet , Simon London, and Leigh Weiss
• “ Reimagine decision making to improve speed and quality ,” September 14, 2020, Julie Hughes , J. R. Maxwell , and Leigh Weiss
• “ For smarter decisions, empower your employees ,” September 9, 2020, Aaron De Smet , Caitlin Hewes, and Leigh Weiss
• “ Bias busters: Lifting your head from the sand ,” McKinsey Quarterly , August 18, 2020, Eileen Kelly Rinaudo
• “ Decision making in uncertain times ,” March 24, 2020, Andrea Alexander, Aaron De Smet , and Leigh Weiss
• “ Bias busters: Avoiding snap judgments ,” McKinsey Quarterly , November 6, 2019, Tim Koller , Dan Lovallo, and Phil Rosenzweig
• “ Three keys to faster, better decisions ,” McKinsey Quarterly , May 1, 2019, Aaron De Smet , Gregor Jost , and Leigh Weiss
• “ Decision making in the age of urgency ,” April 30, 2019, Iskandar Aminov, Aaron De Smet , Gregor Jost , and David Mendelsohn
• “ Bias busters: Pruning projects proactively ,” McKinsey Quarterly , February 6, 2019, Tim Koller , Dan Lovallo, and Zane Williams
• “ Decision making in your organization: Cutting through the clutter ,” McKinsey Quarterly , January 16, 2018, Aaron De Smet , Simon London, and Leigh Weiss
• “ Untangling your organization’s decision making ,” McKinsey Quarterly , June 21, 2017, Aaron De Smet , Gerald Lackey, and Leigh Weiss
• “ Are you ready to decide? ,” McKinsey Quarterly , April 1, 2015, Philip Meissner, Olivier Sibony, and Torsten Wulf.

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Students join the Smith School with a variety of technical skills and educational and professional backgrounds. The resources below have been compiled to assist incoming students with preparing for their master's coursework.

UMD students have unlimited access to  LinkedIn Learning , an online library of instructional videos covering the latest software, creative, and business skills.  

Required  Summer Pre-Skills Assignment for BUAC 712: Business Communication 

BUAC712: Business Communication, taught by Professor Sam Handwerger, is a required first-term course for MS in Accounting students. 

Stories - we all like to hear stories. WHY?

Well, perhaps it helps us make sense out of the events of our life. We seem to be genetically wired to "accomplish" things while we are alive on this earth, to have a meaningful life. Yet life events often seem random.

So if we hear "stories" of others, then perhaps hearing how others have found meaning in the events of their lives helps us find meaning in our own, very unique, life.

"THE MOTH" is a nonprofit venture promoting the telling of stories (see https://themoth.org/ ). The first "speech" in this class will be called "The Moth Speech", and it is all about you.

Sample some examples of The Moth Speech at https://themoth.org/education/stories . Now develop one of your own such stories into a two-page story", writing it out in your own words. Write it out freestyle, meaning just "write", don't think of grammar or spelling or paragraphs. Just write.

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Have your "story" ready at the first class of the course...not to turn in...but to brainstorm how we, as a class, can make use of these for the benefit of others.  

Finally, and not required, but if you feel strongly about the meaning and lesson(s) of your story, feel free to pitch it to The Moth at https://themoth.org/share-your-story/pitchline.

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Required Summer Pre-Skills Assignment for BUAC 740: Data Driven Decision Making

BUAC 740: Data Driven Decision Making (DDDM), taught by Professor Tunay Tunca, is another required first-term course for MS in Accounting students. This critically important course covers analytical tools and models for managerial decisions that are used extensively in managerial practice as well as in other subsequent courses in the MS in Accounting curriculum. To prepare for DDDM all students are required to complete "Spreadsheet Modeling: Introductory Section (SM)," an online course from Harvard Business Publishing. This online course focuses on fundamental skills in spreadsheet analysis that will be used in DDDM. This assignment accounts for 5% of each student's grade for DDDM .

Study Time Required: Students should go through the various units making sure to constructively use the active learning method that is the basis of this online course. The faculty instructor for DDDM will be able to monitor your progress through the various parts of this online course. Harvard Business Publishing estimates that it will take 6 hours to complete this course. Students should assume this as a minimum to be safe and plan accordingly. Students are urged to register for SM and begin studying the course material as soon as possible .

Performance and Due Date:  SM includes a Final Exam with only once chance. Performance in this online exam will account towards the 5% of the grade for BUAC 740. The deadline for taking the SM final exam is Sunday, September 1, 2024, at 6:00 p.m. eastern time.  

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Questions about the BUAC 740 pre-skills assignment or course content can be directed to Professor Tunca ( [email protected] ). 

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Build a Corporate Culture That Works

There’s a widespread understanding that managing corporate culture is key to business success. Yet few companies articulate their culture in such a way that the words become an organizational reality that molds employee behavior as intended.

All too often a culture is described as a set of anodyne norms, principles, or values, which do not offer decision-makers guidance on how to make difficult choices when faced with conflicting but equally defensible courses of action.

The trick to making a desired culture come alive is to debate and articulate it using dilemmas. If you identify the tough dilemmas your employees routinely face and clearly state how they should be resolved—“In this company, when we come across this dilemma, we turn left”—then your desired culture will take root and influence the behavior of the team.

To develop a culture that works, follow six rules: Ground your culture in the dilemmas you are likely to confront, dilemma-test your values, communicate your values in colorful terms, hire people who fit, let culture drive strategy, and know when to pull back from a value statement.

Start by thinking about the dilemmas your people will face.

Idea in Brief

The problem.

There’s a widespread understanding that managing corporate culture is key to business success. Yet few companies articulate their corporate culture in such a way that the words become an organizational reality that molds employee behavior as intended.

What Usually Happens

How to fix it.

Follow six rules: Ground your culture in the dilemmas you are likely to confront, dilemma-test your values, communicate your values in colorful terms, hire people who fit, let culture drive strategy, and know when to pull back from a value.

At the beginning of my career, I worked for the health-care-software specialist HBOC. One day, a woman from human resources came into the cafeteria with a roll of tape and began sticking posters on the walls. They proclaimed in royal blue the company’s values: “Transparency, Respect, Integrity, Honesty.” The next day we received wallet-sized plastic cards with the same words and were asked to memorize them so that we could incorporate them into our actions. The following year, when management was indicted on 17 counts of conspiracy and fraud, we learned what the company’s values really were.

• EM Erin Meyer is a professor at INSEAD, where she directs the executive education program Leading Across Borders and Cultures. She is the author of The Culture Map: Breaking Through the Invisible Boundaries of Global Business (PublicAffairs, 2014) and coauthor (with Reed Hastings) of No Rules Rules: Netflix and the Culture of Reinvention (Penguin, 2020). ErinMeyerINSEAD

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7 Organizational Structure Types (With Examples)

Updated: May 29, 2024, 5:39pm

Table of Contents

What is an organizational structure, 4 common types of organizational structures, 3 alternative organizational structures, how to choose the best organizational structure, frequently asked questions (faqs).

Every company needs an organizational structure—whether they realize it or not. The organizational structure is how the company delegates roles, responsibilities, job functions, accountability and decision-making authority. The organizational structure often shows the “chain of command” and how information moves within the company. Having an organizational structure that aligns with your company’s goals and objectives is crucial. This article describes the various types of organizational structures, the benefits of creating one for your business and specific elements that should be included.

Employees want to understand their job responsibilities, whom they report to, what decisions they can and should make and how they interact with other people and teams within the company. An organizational structure creates this framework. Organizational structures can be centralized or decentralized, hierarchical or circular, flat or vertical.

Centralized vs. Decentralized

Many companies use the traditional model of a centralized organizational structure. With centralized leadership, there is a transparent chain of command and each role has well-defined responsibilities.

Conversely, with a decentralized organizational structure, teams have more autonomy to make decisions and there may be cross-collaboration between groups. Decentralized leadership can help companies remain agile and adapt to changing needs.

Hierarchical vs. Circular

A hierarchical organization structure is the pyramid-shaped organization chart many people are used to seeing. There is one role at the top of the pyramid and the chain of command moves down, with each level decreasing in responsibilities and authority.

On the other hand, a circular organization chart looks like concentric circles with company leadership in the center circle. Instead of information flowing down to the next “level,” information flows out to the next ring of management.

Vertical vs. Flat

A vertical organizational chart has a clear chain of command with a small group of leaders at the top—or in the center, in the case of a circular structure—and each subsequent tier has less authority and responsibility. As discussed below, functional, product-based, market-based and geographical organizational structures are vertical structures.

With a flat organization structure, a person may report to more than one person and there may be cross-department responsibilities and decision-making authority. The matrix organizational structure described below is an example of a flat structure.

Benefits of Creating an Organizational Structure

There are many benefits to creating an organizational structure that aligns with the company’s operations, goals and objectives. Clearly disseminating this information to employees:

• Provides accountability
• Clarifies expectations
• Documents criteria for promotion
• Designates decision-making authority
• Creates efficiency
• Fosters collaboration

Essential Elements of Clear Organizational Structure

Regardless of the special type of organizational structure you choose, it should have the following components:

• Chain of command
• Roles and responsibilities
• Scope of control
• Decision-making authority
• Departments or teams within the organization

Functional/Role-Based Structure

A functional—or role-based—structure is one of the most common organizational structures. This structure has centralized leadership and the vertical, hierarchical structure has clearly defined roles, job functions, chains of command and decision-making authority. A functional structure facilitates specialization, scalability and accountability. It also establishes clear expectations and has a well-defined chain of command. However, this structure runs the risk of being too confining and it can impede employee growth. It also has the potential for a lack of cross-department communication and collaboration.

Product- or Market-Based Structure

Along with the functional structure, the product- or market-based structure is hierarchical, vertical and centralized. However, instead of being structured around typical roles and job functions, it is structured around the company’s products or markets. This kind of structure can benefit companies that have several product lines or markets, but it can be challenging to scale. It can also foster inefficiency if product or market teams have similar functions, and without good communication across teams, companies run the risk of incompatibility among various product/market teams.

Geographical Structure

The geographical structure is a good option for companies with a broad geographic footprint in an industry where it is essential to be close to their customers and suppliers. The geographical structure enables the company to create bespoke organizational structures that align with the location’s culture, language and professional systems. From a broad perspective, it appears very similar to the product-based structure above.

Process-Based Structure

Similar to the functional structure, the process-based structure is structured in a way that follows a product’s or service’s life cycle. For instance, the structure can be broken down into R&D, product creation, order fulfillment, billing and customer services. This structure can foster efficiency, teamwork and specialization, but it can also create barriers between the teams if communication isn’t prioritized.

Matrix Structure

With a matrix organizational structure, there are multiple reporting obligations. For instance, a marketing specialist may have reporting obligations within the marketing and product teams. A matrix structure offers flexibility, enables shared resources and fosters collaboration within the company. However, the organizational structure can be complex, so it can cause confusion about accountability and communication, especially among new employees.

Circular Structure

Similar to the functional and product-based structure, a circular structure is also centralized and hierarchical, but instead of responsibility and decision-making authority flowing down vertically, responsibility and decision-making authority flow out from the center. A circular structure can promote communication and collaboration but can also be confusing, especially for new employees, because there is no clear chain of command.

Organic Structure

Unlike vertical structures, this structure facilitates communication between and among all staff. It is the most complex, but it can also be the most productive. Although it can be challenging to know who has ultimate decision-making authority, it can also foster a positive company culture because employees don’t feel like they have “superiors.” This structure can also be more cost-efficient because it reduces the need for middle managers.

There is no one “right” organizational structure. When deciding which structure will work best for your company, consider the following:

• Current roles and teams within the company. How are job functions currently organized? Does it foster communication and productivity? Does it impede or encourage employee growth?
• Your strategic plan. What are your company’s goals for the short-term and long-term?
• Feedback from employees, leadership and other stakeholders. What do those within your company say about how the company is structured? What feedback do you have from other stakeholders, such as customers and suppliers?
• Alignment. What structure will best support your strategic plans and address any feedback received?

What is the most common organizational structure?

A functional organizational structure is one of the most common organizational structures. If you are still determining what kind of structure to use, this organizational structure can be an excellent place to start.

What is the difference between an organizational structure and an organizational chart?

An organizational chart is a graphic that depicts the organizational structure. The chart may include job titles or it can be personalized to include names and photos.

What are the four types of organizational structures?

A functional—or role-based—structure is one of the most common organizational structures. The second type—the product- or market-based structure—is also hierarchical, vertical and centralized. Similar to these is the third structure—the process-based structure—which is structured in a way that follows a product’s or service’s life cycle. Lastly, the geographical structure is suitable for businesses with a broad geographic footprint.

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Christine is a non-practicing attorney, freelance writer, and author. She has written legal and marketing content and communications for a wide range of law firms for more than 15 years. She has also written extensively on parenting and current events for the website Scary Mommy. She earned her J.D. and B.A. from University of Wisconsin–Madison, and she lives in the Chicago area with her family.