The Manager Should Seek Some Balance Between Quantitative and Qualitative Factors in Decision Making’

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  • Topic: Forecasting, Delphi method, Future
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  • Published : October 23, 2010
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Quantitative Factors –LET US TAKE THE I nvestment Appraisal.

THE FACTORS CONSI DERED ARE

Payback period

NPV

ARR

Provide a numerical basis for decision making – reduces decisions to looking at a monetary value placed on different choices, e.g. Forecasted sales figures for the next 3 years The cost of a series of redundancies against the longer term financial benefits to the firm of this process But: such data provides only part of the story Other factors need to be taken into account, particularly the effects of decisions on stakeholder groups and their response to such decisions, e.g.

The takeover of Manchester United CLUB by Malcolm Glazer might make financial sense but the reaction of the supporters might make the move unworkable

QUALI TATI VE FACTORS

Qualitative factors look to take account of these other issues that may influence the outcome

of a decision Can be wide ranging and especially need to consider the impact on human resources and their response to decisions

CONDUCT THE SWOT ANALYSI S

A decisions (for example, investment in a new production plant) could be considered not only in financial terms but also to apply other techniques of decision making

to look at wider issues:

A SWOT analysis might be part of this:

-STRENGTHS

-WEAKNESSES

-OPPORTUNITIES

-THREATS

PEST ANALYSI S

Might also need to factor in other external issues that might influence the decision making process which can be summarised as:

-POLITICAL

-ECONOMIC

-SOCIAL

-TECHNOLOGOCAL

Political could be in its widest sense,

e.g. the internal politics of a firm as well as the national and international political effect

The decision to site a series of wind turbines in a coastal area might be justified on financial grounds but:

What is the reaction of the local community?

Does government policy support such planning developments?

Are there social impacts – e.g. noise pollution, damage to eco-systems, etc?

Such factors may make the difference between success and failure

Human Resources M anagement

Impact on a firm’ s human resources is essential to consider, in particular the effects on:

Motivation

Morale

Recruitment and Retention

May be difficulty to assess and measure

May need to distinguish between short term effects and long term

Stakeholder Analysis

Wider impacts on stakeholder groups may also be necessary, such stakeholders include:

-EMPLOYEES

-SHAREHOLDERS

-MANAGERS

-ENVIRONMENT

-LOCAL COMMUNITY

-SUPPLIERS

-GOVERNMENT

-CONSUMERS

DECI SI ON M AKI NG

Eventual decision may rest on the balance between the perceived effects of quantitative and qualitative If the long term effect on the workforce for example was to reduce productivity or increase absence because of the impact on motivation and morale, the fact that a decision makes financial sense may be shelved! Qualitative by its nature, therefore, is very subjective considerations in decision making, in addition to the quantitative or financial factors highlighted by incremental analysis . They are the factors relevant to a decision that are difficult to measure in terms of money. Qualitative factors may include: (1) effect on employee morale, schedules and other internal elements; (2) relationships with and commitments to suppliers; (3) effect on present and future customers; and (4) long-term future effect on profitability. In some decision-making situations, qualitative aspects are more important than immediate financial benefit from a decision. HERE IS ANOTHER EXAMPLE OF THE QUANTITATIVE AND QUALITATIVE FACTORS IN DECISION MAKING. SALES FORECAST FOR AN ORGANIZATION. THE SALES MANAGER WOULD USE A COMBINATION OF THESE TOOLS TO ARRIVE AT THE FINAL DECISION.

QUANTI TATI VE M ETHODS

M ETHOD 1

The field perspective, or “ field assessment,” is based on a rollup of individual forecasts, providing management with a bottom-up view of current market...
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