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Decision Making in HR - Coggle Diagram
Decision Making in HR
Data Role
Real time data capture transactions and customer preferences
- eg supermarket loyalty cards
- mobile payment cards and apps
Responding to real time changes in market conditions - Dynamic pricing eg Uber surge pricing - Competitor price comparison
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Capacity management
- Flexible capacity management based on real time functions in demand
Inventory Control
- Automated stock ordering and tracking systems
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Opportunity costs
- Cost of missing out on the next best alternative - Benefits that could have been gained by taking a different decision
- Why they are important
- For some businesses resources are limited (particularly start ups)
- When resources are scarce, significant decisions about what to spend and where become more risky
- Entrepreneurs and managers take calculated risks and weigh up potential implications of decisions
Decision Trees
- Mathematical model
- Used to help managers make decisions
- Uses estimates and probabilities to calculate likely outcomes
- Help decide whether the net gain from a decision is worthwhile
Key terms
-Probability
- Chance of an outcome happening
-Expected value
- Financial value of an outcome. Calculated by estimated financial effect x probability
-Net gain
- Value gained from taking a decision. Calculated by expected value of each outcome + costs associated with decision
Advantages
- Choices set out in a logistical way - Probabilities enable the risk to be addressed
- Costs are considered as well as benefits
- Easy to understand and tangible results
- Potential options and choices are considered at the same time
Disadvantages
- Probabilities are just estimates and prone to error
- Only uses quantitative data
- Assignment of probabilities and expected values prone to bias
- Decision making technique does not reduce amount of risk