Decision-Making Techniques

Decision-making is an integral part of the society at all levels. In the corporate world, the decision made defines success or failure. Startup business ventures and established firms are all vulnerable to the risk of making wrong decisions. It is well known that decision-making is a process that blends techniques and rules. At the center of decision-making rests the ability to reconcile various factors and settle on one direction of action (Vance, 2003). Scholarly research shows that many individuals have failed to make the right decision due to common misconceptions that experts know everything. However, there are cases where the experts’ views are equally influenced by biased interests and in such instances the decisions made may yield undesirable results.
Decision-making captures the ethical practices accepted by the society or business community. Significant ethical challenges surround the decision maker, hence, the need for creative and critical thinking. When it comes to ethics in the business world, reconciling the interest of various stakeholders defines the future of the decision. There are shareholders, customers, creditors, government among other stakeholders. The overriding aspect of ethics is the dilemma that surrounds any decision. Competing variables of relatively close impacts may pose an ethical dilemma. However, it is important to understand what ethics constitute. In most cases there is the difference between what is right and what is good. From the utilitarian perspective, ethical decisions are attached to the material gain from a specific action (McClafferty, 2015). However, according to the theory of Kant, the right outcome serves the best interest of a person and that is what should be emphasized. In that respect, personal ethics determine sustainability of the outcome of the decision. Taking the example of a company, a decision to adhere to acceptable business practices that include fair pricing, fair remuneration policy, and strict quality threshold despite a small profit margin may sustain the image of the company. However, making a utilitarian decision that emphasizes maximum gain in the short-run may ruin the company over time. In that respect, ethical decision-making must emphasize what is right more than the short term materialistic gain.
There are several decision-making techniques. However, some of them tend to dominate most organizations in the society. Common tools include creating a decision matrix, a cost/benefit analysis, a Pareto analysis, or decision tree among others. The size of the organization and its legal status determines the decision-making tool to use. In essence, multinationals, startups, government agencies are all organizations that use different decision-making tools. Multinational organizations, such as Coca-Cola, BMW, Ford, IKEA, and Samsung among others have a complex operational structure with massive financial assets. However, considering the geographically dispersed value creation activities, market segments, and production costs, competitive and market entry strategies they apply decision matrix (McClafferty, 2015). The concept of decision matrix captures diverse variables in a matrix format and assigns score to each option and the alternative with highest score is settled on. Considering the multiple variables that influence the outcome of any decision made in such multinational corporation, a decision matrix is preferred.
Publicly owned companies use cost-benefit analysis to arrive at an appropriate decision. In most cases, this tool is applicable where monetary value is attached to expected benefits and initial costs (Sheena, 2011). Public enterprises calculate the monetary benefits of all proposed projects and their corresponding costs. The alternative with the highest revenue against cost is selected.
Creating a decision tree is also useful for established firms that need to undertake market research. Its use in statistical analysis of qualitative and quantitative data makes it relevant for making informed decision by many for-profit organizations.
A Pareto analysis is another widely used decision-making technique. Both public enterprises and private companies with a strategic plan of expansion use this tool. It is applicable where various alternative projects are to be initiated by the organization, but a priority needs to be established. A Pareto analysis is an effective decision-making tool with sustainable outcome if used to manage projects in order of priority.
Unethical decision-making leads to significant financial losses for companies. One of the cases that one might mention is the recent Volkswagen emission scandal that occurred in the United States. Despite its global popularity, the Volkswagen company chose poorly in a case of ethics versus profit. In September, the global media headline was dominated by VW’s unethical business practice in which 11 million of its cars were installed with software to cheat on emission tests. The company received a lot of negative press and significant financial losses because of fines. While the cheating tactic must have led to a fast profit, exposing the truth caused the company’s loss of reputation and its future is still uncertain. In its third quarter financial standing, VK made a pre-tax loss of €2.52bn. The case of Volkswagen presents the application of individualism as one of the normative ethic theories. In an effort to make a quick profit, the Volkswagen company decided to break the law by misrepresenting facts and even though it might have been profitable at some moment, in the end, the consequences are regrettable to the company to date.
If Volkswagen had used a decision matrix technique, it would have forecasted a long term benefit despite high initial costs of following the current laws and fixing the performance of the vehicles during emission tests. In fact, a decision matrix would have helped the company to assign a score card on each production alternative and settle on making the emission in line with the set regulations. Cost-benefit analysis could have been used too, but it has significant limitations. The company Volkswagen should have used a decision matrix which captures the qualitative aspects of the decision outcomes. In essence, a decision matrix captures the non-monetary impacts. On the other hand, a cost-benefit analysis emphasizes monetary value of undertaking the action and completely ignores several qualitative factors. It is also worth to note that the ethical decision of Volkswagen was driven by utilitarianism and individualism. In these normative ethical theories, shareholder profit maximization was prioritized over the right action (Sheena, 2011). Owing to the global debate on greenhouse effect, airborne infections, and changing oil prices, the decision of Volkswagen was not in good faith. Applying Kant’s theory of ethics would have yielded sustainable market power. Volkswagen would have looked into the future and avoided the myopic and deceptive sales in one of its most vibrant market segment – the United States of America.
It is worth to note that the decision-making process requires an open-mind and a thorough investigation to identify and choose the most viable alternative. Ethics is a critical aspect of decision-making and, therefore, must be taken seriously by individuals and organizations.

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