Leadership and decision-making process is an integral part of an organisations’ financial progress. Throughout history, the right or wrong decisions respectively hugely influenced several cases of company success or failures. The decision-making process is one of the most tedious duties of a manager within the organisation. However, appropriate decisions require the input of all the directors of an institution. Business leaders and managers are faced with several decisions that need to be made each day. The bigger the institutions, the more the number of decisions to be made by the manager each day.
The number of decisions becomes more complicated and frequent as the organisation grows; the decisions also attract ramifications that are more severe. The pressure that comes with increased decision-making at times results in poor decisions with huge repercussions on the institution.
In business, several companies declined in their earnings due to wrong decisions. The management of these companies wrongs business decisions that negatively affected the performance of these enterprises. Other companies forfeited potential business investments that could have tremendously improved the financial status of these operations. All these business decisions resulted in reduced performance or lost a business opportunity.
Business leaders must master the art of making good decisions quickly to keep the business moving forward. However, the best managers know when they require a team effort in their decisions. A good leader would ensure there are skilled, experienced, and trusted advisors around them. The experienced and reliable advisors would guarantee a constant flow of data for full and informed decisions.
Several factors contribute to poor decision making within or...
ganisations. In most cases, poor leadership decisions result from inexperience. Most institutions promote staff members to leadership positions that they do not deserve, not every individual in the organisation deserve a leadership position within the organisation. These appointments lead to strategic poor decision making even though tools for proper decision-making process is available at their disposal.
Good policy decisions provide a competitive advantage to the company; hence, successful companies are associated with good strategic decisions. When making policy decisions on behalf of a company, the managers take the highest risks for their businesses. Some poor decisions are easily avoidable while others require research and analysis of available data to make a well-informed decision. Bad decisions can result from an individual or group of people. If the decision comes from an individual, it will not have a high impact on organisations’ decisions. However, if the decision arises from a large group of people making the same bad decision, it will significantly affect the decision by the organisation.
Most poor business decisions result from inadequate examination of assumptions made and negligence of relevant information. In making a business decision, all the data present must be thoroughly analysed to assess all constraints involved in making those decisions. Assumptions are critical to determining the validity of a particular decision. It is important for every assumption to be critically considered and looked over before arriving at an appropriate business decision.
An example is a scenario where car companies ignore relationships arising from gas prices and sale of automobiles. Assuming such, vital information may lead to poor decision making by automakers
and sellers. Some assumptions made by analysts may not be correct or may have little impact on the performance of the company. Hence, it is vital for managers to assess the validity of information provided to them before making a full decision.
Several companies built in Silicon Valley pride themselves in analytical, data-driven approach when making decisions. Netflix is not unique to this system; it prides itself on data-driven analytical approach when making strategic decisions. However, in 2011, the company made a huge business misstep that affected its financial income. While making its business decisions based on long-term strategy and data reliance, it assumed the role played by its subscribers in its long-term strategic goals. The firm underestimated the emotions of its customers who preferred the little red envelope even if they did not watch the DVD inside. The majority of his clients were not ready to shift to the internet platform.
Its subscribers did not accept the decision by Netflix to divide its movie rental services into two. According to the company, it was to share its services with two one that offered old DVDs by mail, and the second that streamed movies over the internet. Most of the subscribers revolted, and several dropped the service. The decision also tarnished the name of the web service that the company offered. However, it was in addition to an already damaged reputation by high prices charged by the web service. Because of the split, the company ended its third quarter of the year with 800,000 fewer subscribers. The company’s stock plummeted by more than a 24 percent at the end of trading.
However, irrespective of the decline in the number of subscribers the company still performed relatively well in that particular quarter. It posted a net income of $ 62.5million as compared to $ 38 million in the same quarter the previous year. The company’s revenue rose by 49 percent, hence topping the analyst’s expectations. The CEO of Netflix, Mr Hastings said he was not satisfied that the plan to split the firm had been presented to customer focus groups before it was publicly announced. He stated that the corporation was trying to slow its decision-making process to ensure that the customers were fully engaged before such decisions are made. The company may not have recorded any financial losses. However, it did many loose subscribers who would increase its profitability.
The majority of its customers did not welcome the decision by Netflix to split its DVD services to legacy DVD services and streaming video services. The strategic decision did not include customer consultation on what would be convenient for them. Customer consultation through planned customer groups is an important part of strategic decision-making process. A decision made by the company was right for the institution. However, it did not reflect on the requirement by the customer. It is important for the organisation to consider the inputs by customers on specific services offered by a company.
The services should be provided for the convenience of the client. The CEO of the company did note that the company was implementing its decisions too fast. Hence, it was prudent
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