THE DECISION-MAKING PROCESS: A Proposal

A decision is a choice of action from among at least two possibilities.

A decision is a choice of action from among at least two possibilities. When you have a decision to make, and the task is proving not so straightforward – so many things to consider, and the possibility that a wrong decision could be costly, for example – you may have to adopt a formal, structured approach like what is suggested here. It is a seven-step, yet relatively simple, decision-making framework.

1.     Define the required decision. What decision do you really want to make? If the resolution is not clearly stated, the answer at the end of the process may not sufficiently match the problem you had at the start. That is, there is a difference between making a decision as to how to increase sales over a period of six months and as regards how to increase sales by ten percent over a period of six months.

It could further help to state the task with a focus on deciding rather than on the problem. In other words, the sentence how do we increase sales by ten percent over a six-month period? might be better than one that says sales are ten percent less than they are supposed to be over a six-month period.

The former (sentence) urges you on in the direction of finding a solution. It could help you keep your sights on what is to be done, as it not only identifies the problem but also calls you to action in a specific direction. The latter, while indeed also pointing out the problem, tends to blur the all-important need for a deed. 

2.  Gather pertinent facts and figures. Good decisions normally come from a good body of information. It is important to have a healthy understanding of the issues related to the challenge faced. Without relevant knowledge, it might be difficult doing what is required in step 3.

3.   Propose possible solutions. This step involves making a good list of interchangeable decisions that solve the problem in their own way.

4.     Select the best suggestion. The question here is, how effectively and efficiently does each of the alternative decisions listed in (3) address the challenge?

A useful approach is rating the suggested solutions from strongest to weakest. To do this, you need to identify the most important aspects of the solution. That means recognising the specific needs the solution must especially satisfy. To make this clearer, let us go back to our example of increasing sales by ten percent over a time span of six months.

Some key need areas would likely be:

-         What costs does each alternative solution entail?

-         How much effort on the part of the sales team is required in each case?

-         Can the ten percent targeted increase actually be surpassed?

The significance of each of such considerations should always be in sight, for a fuller perspective.

5.   Revisit steps 1 to 4. Just in case a key issue was somehow not factored in, or the required decision was not well-framed, it is necessary to review the first four stages. This can prevent unnecessary, expensive mistakes.

6.    Implement the chosen decision. The selected option can now be put in motion. It becomes necessary, sometimes, to adopt combinations of two or more decisions.

7.     Evaluate the effect. How well does the decision you have picked solve the problem? If not so well, could implementation be the reason? If the implementation looks flawless, you may have to check the first four steps once again.

By the way

Indeed, we said decision-making could be a simple, seven-step process. The reality, it must be said, is that human judgment is not always sober and based on information on the table. Decision-making can be influenced by such powerful internal and external forces as intuition, emotion and amount of time available.

                                     Rupert Chimfwembe

                                      21 November, 2016

HUMAN RESOURCE MANAGEMENT - THE BASICS

Human resource management is the activity of providing an entity the people it requires to function well, ensuring the people stay and generally running “people matters”.

People are the most central asset of an organisation. The value people embody are primarily labour, knowledge and intellect which, normally, are applied simultaneously.

The importance of the human element in production (both for profit and not-for-profit) calls for specialist attention, and hence the presence of a human resource manager in many organisations.

Human resource management can be split into three main areas, namely, employee supply, employee maintenance and administration. We shall examine each in turn, even though these passages will hardly do justice to the wide field of human resource management, and so are better treated as guidelines. They do, nevertheless, present key areas of the job of superintending over the human segment of production.

Some Basic Components of Human Resource Management

                               
EMPLOYEE SUPPLY

It is the process of finding and hiring the people to make the organisation operate efficiently and effectively. It includes:

Planning.The future requirements of an organisation need to be forecast. It necessitates job analysis, centred on job specification and job description.

Job analysis is the determination of the task content of a particular post, the qualifications the position requires and its importance relative to others. 

A job description is a list of the duties a person has to perform in a given post. 

A job specification is a list of the qualifications – in terms of education and experience, and as a person –that an individual has to have to fill a vacancy.

Recruitment and selection. It is the activity of soliciting for possible candidates to fill a position and finally contracting the most suitable-looking. An interview of applicants is normally conducted. Vacancies can be filled through other avenues such as head-hunting and promotion of an existing employee. In head-hunting, there may not always be an interview:a pre-identified top-performer is merely coaxed into joining the organisation.

Orientation and Culturalisation. Orientation means making a new employee familiar with the operations of the new employer. Some of the components of the orientation process are:

-       -   Understanding the practices of the organisation.

-       -   Meeting old members of staff and getting to know different departments.

-       -   Appreciating the mission and vision of the employer.

Culturalisation involves introducing a new person to the norms, values and customs of the workplace. It includes explaining how employees interact with each other and with their employer, and what they hold dear, like marking the birthday of everyone with a celebration.

Placement. This takes place after hiring, orientation and culturalisation. The new employee is finally put in thejob that suits their qualifications.

EMPLOYEE MAINTENANCE

Employee maintenance includes all activities of basically a motivational nature that, ultimately, have the effect of making valuable employees stay with the organisation as long as possible. The employee maintenance responsibilities given below are just some.

Remuneration. It is the compensation in various forms,direct and indirect, financial and non-financial, given to employees in exchange for their services.

Training and development. Training is schooling given to enable one perform better in their existing job. Development is education designed to enable an employee work satisfactorily in a higher position in the future.

Fringe benefits. This is remuneration in addition to the normal salary or wage, such as company accommodation.

Job redesign. It is action taken to keep employees stimulated and working at their best. It commonly takes the form of job enrichment, job specialisation, job enlargement or job rotation.

In job enrichment, an employee may be assigned to do work normally done by someone or others in a higher position.

Job specialisation meansreducing the number of tasks one does.

Job enlargement is expansion of the range of duties performed by an individual, and job rotation involves enabling employees to switch from one job to another, performing each temporarily.

Appraisal. These are reviews, usually annual, of employment performance. They can result in such decisions as recommendation of additional training, development programmes, or promotion.

Appraisal can indeed lead to moving an employee to a position of a lower level that is seen as less demanding but more appropriate, action referred to as demoting. It should really be the last direction to look in, as human resource management should seek to help everyone reach the expected standard of performance. Demotion can also be effected as a disciplinary measure.

By and large, demotion, especially today, remains a route requiring delicate treading.

Labour relations. Human resource management has to do the balancing act of meeting the interests of both management and workers, which do not always coincide.

ADMINISTRATION

Administrative tasks of human resource management are basically those not exactly falling under either employee supply or employee maintenance. They embrace, but are not limited to, updating files, devising employee-employer-friendly leave plans (normally done hand-in-hand with employees and their supervisors), and ensuring that everyone operates within organisational policy.

From time to time, human resource managers find themselves in the unenviable situation of performing the formalities of severing ties between employee and employer.

Rupert Chimfwembe

 8 November, 2016

BASIC LEVELS OF MANAGEMENT SENIORITY

Three basic levels of managers exist. They are first-line, middle and top, who all perform the four key management functions of planning, organising, leading and controlling, but with great variations in how much of each of these tasks each level does.

First-line Managers

First-line managers or supervisors are the lowest in the management hierarchy. They are responsible for directly overseeing the work of non-managerial employees, who do the actual work of the organisation, and thus spend a lot of time leading and controlling. A lot of the planning of first-line managers is likely to be focused on a single day, week, month or a few months.

First-line managers need to possess a lot of technical competence as they have to closely monitor, advise and even give practical examples to the employees they supervise.

To have technical capacity means possessing both knowledge and practical abilities in such areas as salesmanship, accounting and machine operation.

First-line managers typically carry titles like foreman, supervisor, head-driver and office manager.

Each first-line manager reports to a middle manager and is actually directly in charge of one of normally a number ofsub-sectionssuperintended over by the middle manager. So, a first-line manager is likely to be found doing such work as supervising technicians in a workshop.

First-line managers interact a lot with other first-line managers, and middle managers, to ensure co-ordinated production of goods and services.

Middle Managers

Middle managers, who frequently are department heads, report to top management. They are the link between first-line managers and top management.

Middle managers convert broad objectives, policies and programmes created by top management to narrower, department-level goals, philosophies and activities.

Middle managers co-ordinate the work of the first-line managersworking under them.

Common titles of middle managers include marketing manager, production manager and finance manager.

Many individuals in middle management positions earlier served as first-line managers. In middle management, though, their involvement in technical activities is less.

Middle managers are instrumental in advising top management on such issues as the best goods and services to deal in and the most appropriate production methods.Staff training and development is another critical responsibility of middle managers.

Leading, organising and medium-and-short-term planning are common middle management activities. 

Top Managers

Top managers are responsible for the stewardship of the organization as a whole. They make general but far-reaching, long-term plans intended to, among other things, ensure institutional survival, create competitive advantage and grow the organisation.

Top managers normally include the board chairman, chief executive officer, president vice-president and directors of divisions. The plans, goals and policies they formulate become operational points of focus for the middle managers.

The typical work-day of a top manager hardly ends. Many matters requiring total concentration are done long after stipulated working time - and deep into the evening – at the office or at home.

Organisational success or failure ultimately rests on the heads of top management. They not only map out key directions but also find the resources for them. A large proportion of their time goes into planning.

Management levels. Bottom up: First-line management, Middle
Management and Top Management. The number of managers decreases at
each higher level

Management styles

Despite the existence of the above general hierarchy, personal style often determines exactly how a middle or top manager does their job.

Some middle managers, for example, while respecting the part played by their first-line managers, like to have as much direct communication as possible with the non-managerial staff, partly as a way of being in greater touch with reality.

Rupert Chimfwembe, 19 January, 2016.

COMMON STRATEGIES USED IN PRICING

Price is the amount of money organisations, groups and individuals ask for in a business exchange before giving away a product. 

Price is the amount of money organisations, groups and individuals ask for in a business exchange before giving away a product. Price is the amount of money organisations, groups and individuals ask for in a business exchange before giving away a product. Depending on the agreement reached between the party that has to give the product and the party that has to part with the money, the price is paid before or after the product is given; or partly before and partly after. (Payments in kind also represent price).

Price is one of the four traditional marketing mix variables that include product, place and promotion.

The kind and level of price set is driven by organisational and marketing objectives. Some of the most common objectives are:

1.     Recovering expenses (cost coverage)

2.     Maximising profit

3.     Maximising  sales (and in the process increasing market share)

4.     Maximising  revenue

5.     Matching or beating competition

6.     Preventing collapse of business

7.     To be leader in quality

A business may actually pursue more than one objective in its pricing approach.

In setting the price that is in line with objectives such as the above, there will be at least four major influences, including:

·        Costs, such as those concerning labour, promotion and distribution.

·        Customers, who, for example, may not be able, or simply willing, to pay above a certain price.

·        The competition. Will our price be so high as to give other suppliers a big advantage? Will it be so low as to ignite a price war? These, of course, are just two possible scenarios regarding competition. 

·        Distributor needs.  The manufacturer’s price must leave room for other members of the distribution channel, such as wholesalers and retailers, to place decent markups on their costs. 

Common Pricing Strategies

There is an endless list of pricing strategies employed by marketers. Here, we only cover some of the most popular. 

Strategies like skimming, penetration and introductory pricing are used when a new product is brought to the market.

Skimming pricing. A skimming pricing approach involves charging a price that, generally, only the higher-income group can pay. Skimming is a profit-maximisation policy. 

New products with new features and no competition are good candidates for a skimming policy. However, as new suppliers enter the market, prices are bound to fall because businesses need to maintain or increase sales revenue.  Reducing prices that way not only helps keep away competitors but also creates new buyers among lower-income groups. 

Penetration pricing. This strategy suits a price-sensitive market, or one in which there is likely to be strong competition at the heels of a newly-launched product. A low price is fixed for a new offering and offered to every customer. 

Penetration pricing can help grow market share. If the market is really big, the supplier can additionally benefit from economies of scale as unit costs drop. For instance, it may be possible to effect a reduction in price.  

Penetration pricing is also called stay-out pricing. 

Introductory pricing. Introductory prices are probably more useful in a market with established suppliers. 

Introductory prices are lower than those of older players. The aim is to induce ‘trying’ of a new product. 

Unlike in the case of penetration pricing, the new supplier raises the price as soon as it has created interest and a significant number of customers.

Some older suppliers sometimes lower the prices of their competing brands to avoid losing market share to the new entrant.

Competition-driven pricing. The traditional ones involve:

·        Pricing at the existing average market level.

·        Pricing above the market level. This is also called premium or prestige pricing), and

·        Pricing below the market level.

One will note that strategies like penetration pricing and introductory pricing (discussed above) do qualify, too, to be called competition-driven pricing. 

Psychological pricing. Psychological pricing is often odd-even pricing. Instead of pegging the price of an item at, say, $300, the seller may choose a figure of $299. One possible effect on the customer is that the price will be associated with the ‘lower budget’ of $200 instead of the ‘more-financially-draining’ $300.

Geographic pricing. This takes place when the price of a product varies from one location to another as the supplier takes into account changes in costs caused by transporting over different distances.

Differential pricing. In differential pricing, the same product, quantity and quality are offered to different customers groups at different prices. It is a discriminatory type of pricing and works well when the targeted markets are heterogeneous (possess different characteristics). 

An example of differential or discriminatory pricing is when a public transporter charges off-peak customers less than peak clients. Differential pricing does not involve cost differences. 

Differential pricing may not always be legal. Additional conditions are likely to include the evidence that it is not so easy for a ‘business chancer’ to buy at the lower price and sell at the higher. 

Product line pricing. A product line is a set of products with the same general characteristics. In product line pricing, each variation of the product is given its own price. Because prices range from lowest (for the most basic variety) to highest (for the most sophisticated), customers are given chance to purchase the product variation their pocket can afford.

The possibility of fixing a price which results in one product losing sales to another must be avoided.

In some cases, two or more product varieties are bundled together as one offering to ensure sales of each. The price given is lower than the total of their individual prices.

Captive product pricing. In captive product pricing, an item is offered at a low price while spares and other supplies carry a high price. The spares and supplies are usually not interchangeable with those of a competing product – which may be much cheaper.

Value-added pricing. This involves increasing the benefits to the customer without raising the price. Higher efficiency levels are one way of aiding value-added pricing.

Promotional pricing. A promotional price is one given occasionally for such purposes as reversing sales decline, strengthening brand loyalty, encouraging early purchase and diverting customer attention from a new product. 

Discounted pricing. A discount is a reduction in the normal price (list price). They are given to encourage volume purchases. Three examples are:

·        Cash discounts, given when there has been prompt payment.

·        Quantity discounts, given when large volumes are purchased.

·        Seasonal discounts, for buying an item or service at off-season times.

                                                                     

Pricing products accurately can be difficult and involving. Marketers have to read the marketing environment accurately, considering all relevant information and not losing sight of the central aspirations of the organisation. 

Rupert Chimfwembe 6 January, 2016.