2 - Managers, leadership and decision-making
What managers do
Five basic tasks of a manager set by Peter Drucker...
Motivate and communicate - creates a team that works together.
Measure - analyse and appraise performance.
Organise - divides work into manageable activities.
Develop people
Set objectives
Summed up in four key tasks, the role of a manager is they plan, organise, direct and control.
Types of management and leadership styles
Three basic styles of leadership...
Democratic leaders - make the final decision but include others in the process.
Laissez-faire leaders - allow team members freedom if they do work and meet deadlines.
Autocratic leaders - make decisions without consulting others.
Other leadership styles include charismatic leaders (believe they can do no wrong), paternalistic leaders (try to make decisions in best interest), and bureaucratic leaders (do everything by the rules).
Tennenbaum and Schmidt's contiuum of leadership behaviour
Black and Mouton's leadership grid
Country club management - emphasis is on people, little concern for the task. May hamper production as it relies on motivated workers.
Authority-compliance management - leadership = autocratic, clear emphasis on task, little concern for people, increased production but unhappy workers.
Impoverished management - leadership is ineffective, little concern for the task or the people.
Middle-of-the-road management - some focus on the people, some focus on the task.
Team management - focus on both task and people, most effective, emphasis on empowerment, trust and team working.
The effectiveness of different styles of leadership and management and influences on these.
Link to a table that goes in-depth about different leadership styles: https://drive.google.com/file/d/1w-6Houk7Ea6sHdS-SolxKFDMykFaqAc4/view?usp=sharing
Key influences
Nature of the industry - some industries require a high degree of creativity, whilst with others, safety might be paramount.
Business culture - if a business likes to do things a certain way, it may determine the adopted style. It may have always operated with a laissez-faire approach that might prove difficult to change.
The individual - some leaders feel they constantly have to be in control, whereas others may feel comfortable discussing decisions and will be more democratic.
The value of decision-making based on data and on intuition
Scientific decision making - decision-making based on data that uses a logical and rational approach.
There are uncertainties associated with any decision which may stem from the market, the economy, the consumer, competitors and more.
For any decision that is made, a scientific approach may be adopted.
This involves the collection and analysis of data and the use of analytical tools.
Opportunity cost
This is the cost of the next best alternative that will be missed by making a particular decision.
Business resources, particularly finance, are limited and as a result a business won't be able to undertake everything it intends to, and so has to make a choice.
Intuition
Intuition refers to decisions made on a gut feeling rather than evidence and rational processes.
For innovative products, it may be impossible to judge consumer reaction if they have never seen the product.
The use and value of decision trees in decision-making
Decision trees are tree-like diagrams that are used to determine the optimum course of action in situations where several possible alternatives with uncertain outcomes exist.
Decision trees show various options, their probabilities and financial outcomes.
Drawing and evaluating a decision tree
Please follow the link below for an in-depth explanation surrounding drawing and evaluating a decision tree:
Influences on decision-making
External environment
Competition
Ethics
Resource constraints
Mission and objectives
A business's mission is its essential purpose and, to some extent, it will be guided in its decision making by its mission and objectives.
All about making decisions that are morally correct.
The growth in fair trade products such as chocolate and coffee illustrates how some businesses have been influenced by this in their decision-making.
A downturn in the economy or rising interest rates could see decisions being postponed or completely abandoned.
However, an expanding economy or falling interest rates might see decisions being brought forward.
Not only this, decision-making will be influenced by changing demographics, increased environmental awareness and law changes.
Some business decision-making will be aimed at first-mover advantage and getting ahead of competition, whereas other will simply be responding to the action of competitors.
A business can only do what it can physically do.
Production capacity, skills of the workforce and financial resources will, in the short term, limit a business's capabilities.
In the long term, it may be possible to overcome these constraints.
The need to consider stakeholder needs when making decisions
Examples of various stakeholders are as follows...
Employee - job security, good working conditions, pay.
Customers - good customer service, value for money.
Shareholders - capital growth and dividends.
Suppliers - regular orders, on-time payment.
Local communities - pollution avoidance and congestion, employment.
Government - employment, tax payments.
Stakeholder: any individual or group who has an interest in the activities and performance of a business.
Stakeholder mapping
Stakeholder analysis and management is important in decision-making. Follow the above link to see the matric that Mendelow drew up.
Link to Mendelow's matrix:
In this, stakeholders are categorised according to their power and level of interest. Those high in power and interest are key players, and they need to be kept happy.
Those low in power and interest require minimal effort, perhaps just keeping them up to date.
Stakeholder needs and the possible overlap and conflict of these needs
Follow the link below for a table on the potential overlap and conflict of stakeholder interests:
Influences on the relationship with stakeholders
One main influence is the power and interest of individual stakeholders as illustrated by stakeholder mapping.
Other key influences included...
Leadership styles - an authoritarian leader may have little concern for stakeholder groups and would be unlikely to consult them. A more democratic leader would be more likely to consult when making decisions.
Business objectives - some may be committed to an ethical approach in their decision-making, whereas others may be less concerned.
Government - legislation introduced by the gov. can affect relationships with stakeholders.
State of economy - economic and market conditions booming = easier to address issues related to stakeholders. There's likely to be greater access to finance to improve working conditions and environmental aspects.
The opposite is the case when the economy or market is in decline.
How to manage the relationship with different stakeholders
Stakeholder mapping will give an indication of how relationships can be managed in terms of recognising those with the greatest power and interest in a decision.
Make decisions, set objectives, leading, analysing, reviewing.