Importance of decision making
A manager has to make and implement decisions as part of his role. Being a future manager in the contemporary business environment, the students are expected to face critical management-related issues and to make key decisions to resolve those issues in timely manner. Discuss the decision-making process from a manager’s point of view using a real-world management-related example/issue. How can you improve your decision-making skills? Why do managers make wrong decisions? How you could have made a better one? Which step of the decision-making process could you have improved?
Decision making is one of the most important aspects for any organization. Making the right decisions at the right time and in the right manner is exactly what takes organizations to the highest rung of victory. It is imperative for managers to understand the importance of effective business decision making in order to make sure that the business is on the right track (Goodwin & Wright, 2014). Poor decisions have adversely impacted well established and highly successful organizations making their survival difficult in the industry. Through this report, we aim to understand the importance of decision making with the help of real world examples. The case throws light on a terribly wrong decision made by Blockbuster, DVD renting firm.
Decision making is very important for the success of any business. There is no other way for organizations to grow in their respective industries. Proficient decision making helps businesses in identifying customer needs, evaluating competition in the industry and ensure maximum stakeholder satisfaction (Ingram et. al., 2015).
During 1980s Blockbuster was the leading name in the movie and game DVD renting industry. Their massive customer base and strong brand name enabled them to dominate the industry for over two decades. Leading movie producers and distributors tied up with Blockbuster in order to make sure that the movie finds its audience through Blockbuster’s customer base.
While the brand was at the top of its game, there were 9904 running stores of Blockbuster and the brand’s revenue surpassed the mammoth mark of $6 billion annually. However, the firm failed to adopt the changing needs of the customers and failed to live up to the success that it had earned for itself.
During 1990s, a small startup Netflix which developed as an online streaming platform offered itself to Blockbuster. The latter presented a deal for both the firms to join hands for $50 million. As a part of the deal, Netflix would assist Blockbuster in developing its own streaming platform while the former would gain Blockbuster’s expertise and develop its on DVD renting and mail service. However, Blockbuster refused the offer rather rudely considering the startup status of Netflix and its lack of popularity in the industry.
Decision making process
The tables turned against Blockbuster with the advent of technology, increasing use of internet and high adaptability of the same. As on 2014, Netflix was valued at $20 billion while Blockbuster had filed for bankruptcy in the year 2010. By 2013, the brand shut down its last store and canceled its DVD in-mail service.
The above example helps in understanding the importance of decision making. One wrong decision can change the fate of organizations and hence it is important to understand the criticality of effective decision making in the business. Had Blockbuster effectively evaluated its options and invested in understanding the future of the industry or changing customer needs then both the firms would have been leading the industry with mutual collaboration and customer base. Instead, blockbuster no longer exists and Netflix has become a rather irreplaceable part of people’s daily routines.
While making any decision, it is essential that the decision making process is kept in mind. The decision making process has various steps and each step of the process is highly important. Therefore it is important that organization do not falter at any step in order to make sure that the right decision is taken at the right time and in the right manner which will eventually prove to be beneficial for the business.
Step 1: The first step in the decision making process is to analyze the problem. It is important to note that managers of the business may not face a decision making process only during a problem. But what this step signifies is that while confronting any decision, organizations must identify the reason behind making that decision. This step helps in identifying the nature of the decision. In the example stated above, Blockbuster must have identified the changing consumer needs and the future of technology as a problem confronted to the business.
Step 2: During this step, various alternative solutions are presented before the organization and the firm must analyze those alternatives one after the other in order to understand the pros and cons of them all (Tomczak, Reinecke & Kuss, 2018). In the above example, Blockbuster must have tried to identify the pros and cons associated with joining hands with Netflix. Blockbuster must have also tried to understand if it can imitate Netflix and start its own streaming platform. Also, they should have analyzed if they could collaborate with any other brand which may seem fruitful for the company.
Strategies for improving decision-making skills
Step 3: This third step helps organizations in deciding the best alternative for the decision making from the alternatives listed above. This is done by conducting a detailed analysis of all the alternatives that are presented to the brand. This step requires critically examining all the steps and finally deciding the best alternative. In the Blockbuster’s example, the brand could have finalized its deal with Netflix if they had analyzed the options effectively.
Step 4: During this step, the decisions taken by the business are finally converted into actions. At this step, Blockbuster could signed the deal with Netflix. The next step of this process would be to discuss various intricacies of the deal and discuss various issues regarding the collaboration of the two brands. This would pave a transparent path for both the firms and clearly specify responsibilities and accountabilities of the two organizations as a part of the deal.
Step 5: Following up on a decision is highly important as it helps businesses in making sure that the business decision taken by them is working well for them. This step also involves addressing new issues that may be faced after the implementation of the decision. For the example mentioned, during this step, Blockbuster and Netflix would have understood if their deal is working out and is mutually beneficial or not.
Every effective manager works towards improving their decision making process. This is imperative to ensure that the business takes the right decisions. There are various strategies that can be implemented by organizations to make improve their overall decision making process. These strategies are as below:
- Environmental analysis plays a significant role in ensuring improved decision making process. In order to improve decision process of the business, managers must conduct a thorough environmental analysis. Had Blockbuster done the same, it would have been able to identify with changing customer needs and growing technology.
- Another important strategy for improved decision making is to keep the value system of the business intact. Various decisions may seem profitable but may not adhere to the values of the business. In such a case, it is essential that businesses maintain their values and take ethical decisions (Shapiro et. al., 2014).
- Stakeholder satisfaction must always be kept in mind while making important decisions for the firm. Considering the impact of the decision in all the stakeholders of the business will help managers in taking ethical decisions for their organization.
- Brainstorm all the alternatives before completely accepting or rejecting a particular decision. In this case, if Blockbuster had conducted a “What-If” analysis, it may have been in a better position to make a profitable deal.
- Lastly, it is important to identify a wrong decision and put efforts at the right time to reverse the same. Netflix started gaining popularity in mid 1990s and hence if Blockbuster had been able to identify the same at the right time, it may still be in business.
There are various reasons behind managers making wrong decisions. First and foremost reason is the inability of the manager to identify changing customer needs. Secondly, Many times managers rely too heavily on past experiences for making decisions (Drucker, 2016). However, with the changing scenario, past experiences of managers may not be as effective. Lack of clarity is the third reason for poor decision making among managers (Forbes, 2013). Fourthly, a lack of resources with the organization may sometimes lead managers to make poor decisions. Lastly, when managers miss out on seeing an opportunity, like in the case of Blockbuster, they may make wrong decisions.
Conclusion
Decision making is one of the most critical responsibilities of any manager. It is highly important that managers of the business make the right decisions to ensure the growth of the business. This report has highlighted upon a poor decision made by DVD renting business Blockbuster by rejecting the offer made by Netflix to collaborate. Not only did Blockbuster miss out on the chance of collaborating with a now $20 billion business but also Blockbuster filed for Bankruptcy.
It can be learnt from the experience that adopting the effective decision making process, following every step efficiently, understanding customer needs, assessing alternatives and proficiently timing the decision can help businesses in taking the right decisions at the right time for the growth of the business
References
Drucker, P. (2016). The effective executive. Routledge. United Kingdom.
Forbes, (2013), ‘Reasons leaders make bad decisions’, Available at https://www.forbes.com/sites/glennllopis/2013/05/28/6-reasons-leaders-make-bad-decisions/2/#6c78259f3343, retrieved on 17 June, 2018.
Goodwin, P., & Wright, G. (2014). Decision Analysis for Management Judgment 5th ed. John Wiley and sons.
Ingram, T. N., LaForge, R. W., Williams, M. R., & Schwepker Jr, C. H. (2015). Sales management: Analysis and decision making. Routledge.
Shapiro, J. P., Stefkovich, J. A., & Gutierrez, K. J. (2014). Ethical decision making. Handbook of ethical educational leadership, 210.
Tomczak, T., Reinecke, S., & Kuss, A. (2018). Introduction. In Strategic Marketing (pp. 1-18). Springer Gabler, Wiesbaden
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