Internal Causes of Change

The three main internal causes of change are changes in organisational size, new leaders/owners, and poor business performance.

Changes in Organisational Size

Growth is usually seen as a natural development for a company. It can provide benefits and opportunities for a business and for its stakeholders. At a basic level, growth enables a company to reach breakeven and make profit. It provides more opportunities for a company to take advantages of economies of scale, and a growing, dynamic company is more likely to remain competitive. There are four main reasons for the change in organisational size of a firm; organic growth, mergers, takeovers and retrenchment. Organic Growth - When a firm expands its existing capacity by extending its premises or building new factories from its own resources, instead of integration with another firm Organic growth is an internal growth strategy, and may be pursued for a number of reasons: A product is in its early stage of the product life cycle and is not yet fully established in the marketplace When its products highly technical and the firm needs to gain experience of dealing with it, ensuring any problems are ironed out If the costs of growth need to be spread out over time May be the best option because there are no suitable acquisitions available Finance used to implement organic growth tends to come from the retained profit, borrowing or attracting new investors. This means the process tends to relatively slow, but carries a smaller risk. Merger - Where two or more firms agree to come together under one board of directors Mergers occur when the two businesses agree that they can increase their combined profit or achieve other objectives through merging their businesses. It is an external growth strategy, which is usually the fastest way to achieve growth, but given the problems of integrating two separate organisations, it can be risky. Mergers, as well as takeovers, can be classified into three types of integration: Vertical Integration the coming together of firms in the same industry but different stages of the production process Horizontal Integration the coming together of firms operating at the same stage of production and in the same market Conglomerate Integration the coming together of firms operating in unrelated markets

Takeover - Where one firm buys a majority shareholding in another firm and therefore assumes full management control Along with mergers, takeovers are usually the fastest way to achieve growth, however it can be risky due to the problems of integrating two separate organisations. Reasons for Takeover Large company entering a new market may not have the necessary technical expertise and may acquire smaller companies with the expertise Costs of acquisition or integration may be more favourable the costs of internal growth, and the speed of growth may be a high priority Brands are expensive to develop in terms of time and money, therefore acquiring companies with prominent brand names is a way to avoid such expenses Resulting organisation can exploit any patents owned by the company it has acquired An organisation may have identified that the market value of a company is considerably less than its assets value. Assets can be sold, and loss-making areas discontinued. In order to be a success, combined organisation need to deliver better returns to the shareholder than they would separately (synergy). The merging companies need to decide in advance which partners way of doing things will prevail ie. which culture will be adopted. Combined organisation must generate advantages that competitors will find difficult to compete with. Retrenchment - The cutting back of an organisations scale of operations Just as companies encounter problems when becoming larger, there are also problems when reducing the scale of operations. These include the damage to morale, relationships, trust and also job losses. Retrenchment can take a range of forms: Halting recruitment or offering early retirement or voluntary redundancy. This might lessen the feelings of job insecurity among existing employees, however staff who takes up the offer may be key people. Delayering. This is the removal of a layer of management from the organisational hierarchy. It has less impact on operations at shop floor level, so has less impact on production. It may empower or enrich jobs at the lower level of management, but will leave staff with more work Closing a factory, outlet or division of the business. It reduces the overall fixed costs for the business, as well as the break-even point. However it is difficult to reverse if there is an upturn in the economy and closure will mean a loss of many good staff with valuable skills Making targeted cutbacks and redundancies throughout the business. This should allow the company to reorganise to meet objectives, and also enables the company to get rid of less productive staff members. This might improve the overall performance of all staff, but will create feelings of job insecurity and lack of trust.

New Owners and Leaders

Managing Growth Growth is a difficult process to manage for medium sized business, especially if it is rapid. This often means owners, who have been in complete control of all aspects of a business, have to plan for, and then adjust to, handing over responsibility to others. In comparison, the leadership of a large business tend to have a much less hands on approach and tend to delegate more. Also, the task of controlling and coordinating activities is much more difficult Without strong and effect management, growth can result in a loss of direction and control. The demands placed on a leader in relation to managing and motivating a large team require very difficult skills from those needed in a medium-sized business. Introducing a solid organisational structure, having an effective management team, and carrying out detailed financial and operational planning and forecasting are all vital. There are a number of issues to consider when a business grows: Management structures and hierarchies will need to change so that the business is better positioned to achieve its objectives. Medium sized businesses may replace their simple and clear functional structure with a complex matrix structure, or a product/region based structure. Spans of control are likely to increase and new layers of authority, as well as departments will need to be created. There will be more delegation. Original owners are likely to lose much of the direct contact they hand, and will take on more of a managing and leading role. Professionals in finance, marketing and personnel will need to be recruited to take on growing specialist responsibilities, and an effective management team will need to be created Staff responsibilities will need to be changed. The workload of staff will grow and employees will need to focus on what they do best. Jobs will become more clearly defined, with job descriptions, training and development plans, and appraisal systems being introduced Staff motivation may decline in the short term, as the changes that result from the growth begin to have an impact. This may affect customer service. Staff may suffer due to lack of contact with the top of the business, and may resent the extra layers. Managing and motivating a larger team successfully is likely to require a democratic leadership and management style. This may be very different to the previous style. Bringing in a Management Team During growth, a business will need restructuring. In many instances the expertise to build and manage that structure will come from outside the business. A bigger company needs managers to take control of departments and a hierarchy that has the expertise and time to drive it forward. Private investors and venture capital firms evaluate management structures and expertise before committing funding, and often insist of recruiting new or interim management. This can be seen as a way of taking control away from the founder, but if is often a means of protecting their investment by ensuring that any skills gaps are plugged and that the necessary structures and experience are in place.

Management Buyouts and Private Equity Takeovers - Management buyouts (MBO) are where the managers of a business buy out the existing shareholders in order to gain ownership and control of the business or part of the business Finance for Buyouts: Finances for buyouts can come from managers personal funds, bank loads and investment funds obtained by selling shares to employees, but it is more usual for it to come from either venture capitalists or private equity firms, which work by lending the MBO the cash and by taking a stake in the company for a return. Reasons for Buyouts Large businesses might sell a small section to raise cash, refocus the business, or get rid of an unprofitable activity. The management team of this section might feel it could be successful with a different approach or more finance, therefore attempt to buy it Owners of a family business who wish to retire might prefer to sell to the management team in the hope of maintain employment sand continuity in the community The firm might be in the hands of the receiver, who must try to keep it going in order to raise money to pay off creditors. One way of doing this is to sell parts to the management team Rewards of Buyouts Management and employees have more motivation and responsibility Objectives may be clearer because there is no owner-manager conflict There is likely to be less bureaucracy in the form of a head office that might hinder progress Profits will not be diverted to another part of the organisation If successful the possibility exists of floating the company on the stock market or selling shares in a takeover offer Risks of Buyouts If unsuccessful, personal losses are felt by the new owners or investors The original owners might have been correct in assessing the business was fundamentally unprofitable There may be little access to capital They often involve considerable rationalisation and job losses, with adverse effects on staff morale Managers have to learn a whole range of new skills immediately, particularly if they have bought out from a large company. Suddenly they have to do everything that before than took for granted

From Private to Public Limited Company This usually means floating stocks on the stock market. Companies join the stock market all the time, the more optimistic the economic climate, the more new issues of shares there are. The value of a stock market listing is that a company has high profile and access to a large pool of capital. This can provide a more balanced capital structure, especially for highly geared firms. A drawback of floatation is that public companies are answerable to shareholder and investment analysis will scrutinise the company prospectus closely. Once on the stock market, shareholders may be simply interested in generating quick profits at the cost of longer term success, whereas shareholders of private companies tend to be in it for the long run, willing to have smaller dividends and greater expenditure of research and development. Once the shareholders base is widened, the firms comes under severe pressure to generate record levels of profits year by year, even if the right thing to do is spend money on research for future success.

From Public to Private Limited Company Private limited companies have the advantages or more privacy and less pressure on management result from share price movements. This allows management to take a longerterm view. Firms go private because of lack of interest in private firms. The benefits of being listed are outweighed by the costs of meeting regulatory requirements and by the time that needs to be spent with analysts and fund managers and generally communicating with the market.

Poor Business Performance

Internal change can also come about as a result of the poor performance of a business. Such a situation may lead to a change (usually a decline) in the size of a business and/or it may lead to a change in ownership or management. Much will depends on the context of the business, but any of the changes and strategies discussed above may be appropriate. For example, a business that is not performing well and whose share price is falling may be an attractive proposition for another business considering a takeover. It may be that the business is not performing well because the original management did not have the required skills or experience, in which case, new leaders will often be bought in.

Planning for Change

Corporate Plan
Strategy detailing how a firms aims and objectives will be achieved, comprising both medium and long term actions

The mission statement, corporate aims and corporate objectives of a company dictate the future direction of the business. The corporate plan attempts to achieve these aims and objectives and also ensures that the firms actions match its mission statement. Aims and objectives start off broad at the corporate level and become more detailed at the level of each functional area. This encourages a coordinated approach. The same approach is used in determining these corporate plan or strategy. This will have an impact at every level of the firm. It will set out what the different functions of the business will do to contribute to the corporate plan and hence the achievement of corporate objectives. The success of a corporate plan depends on Whether it is the right plan for the business in its present circumstances Whether there are adequate financial, human or production resources to implement the plan Probable actions and reactions of competitors How changes in the external environment are likely to affect the plan and the business

Strategic Decisions Strategic decisions, which result in the corporate plan, concern the general direction and overall policy of the firm and are likely to influences its performance. These decisions have significant long term effects on the firm, therefore require detailed consideration and approval at senior management level. They can be high risk as outcomes are unknown and will remain so for a long time. They often involve moving into new areas, which requires additional resources, new procedures and retraining. May concern whether the firm should consider expansion by acquisition or by organic growth in order to achieve its corporate goal

Tactical Decisions In contrast to strategic decisions, tactical decisions tend to be short to medium term and are concerned with specific areas rather than overall policy. They are calculated, and their outcome is more predictable. They may be used to implement strategic decisions and are usually made by middle management.

Corporate Planning Process

The corporate planning process involves the following stages Mission statement. This stage sets out the purpose of the organisation and its corporate aims Objectives. This stage breaks down the corporate aims and indicates how they can be achieved in terms of functional objectives

To produce a plan of action, a company needs to gather information about the business and its market. Such information comes from internal and external sources: Internal Environment. This stage reviews the organisations different functional areas in order to assess its core competencies, what its key resources are and how successful it is in the market it operates in. Through sensible resource utilisation and a focus on core competencies that a business is best able to take advantage of opportunities External Environment. This stage assesses the key changes that are taking place in the organisations external environment. It makes use of PESTLE analysis and Porters Fiver Forces Competitor Analysis SWOT Analysis. Identifies the key strengths and weaknesses of the organisation and its external opportunities and threats. It then analyses what the organisation needs to do to counter threats, seize opportunities, build on its strengths and overcome its weaknesses Strategic Choice. Identifies a range of options available to the organisation in order to gain a competitive advantage. A range of approaches to decision making can be used, as well as Porters generic strategies Strategic Implementation. Puts the strategy into effect, creating a framework and responsibility for carrying out the strategy at a functional level. This is where strategies are translated into policies, rules, procedures and operational targets Control and Evaluation. Monitors and reviews the success of the strategy and assesses actual performance against what was intended. This enables modifications to be made to the mission, aims and objectives, SWOT analysis, strategic choices and implementation strategies. It is not only a control device, but a means of improvement

SWOT Analysis
SWOT analysis is a technique that allows an organisation to assess its overall position, or the position of one of its divisions, products of activities. It uses an internal audit to assess its strengths and weakness, and an external audit to assess its opportunities and threats. It gives a structured approach to assessing the internal and external influences on corporate plans. Internal Audit o Involves looking at current resources (strengths and weaknesses) , how well they are managed and how well they match up to the demands of the market and to competition o Needs to range across all aspects of each of the functional areas External Audit o Involves looking at the possibilities for development in different directions in the future (opportunities and threats) o One method is to categorise according to a PESTLE analysis

Advantages Highlights current and potential changes in the market and encourages an outward looking approach Encourages firms to develop and build upon existing strengths Relates the present position and future potential of a business to the market in which it operates and the competitive forces in it, meaning it is an excellent basis for making decisions By determining the organisations position, it influences the strategy that will be employed in order to achieve the organisations aims and objectives Disadvantages Tim consuming Situation can rapidly change making it irrelevant

Contingency Planning
Preparing for unexpected and usually unwelcome events that are reasonably predictable and quantifiable

In a business context, a crisis is any unexpected event that threatens the well-being or survival of a firm. It is possible to distinguish between two types of crisis; those that are fairly predictable and quantifiable, and those that are totally unexpected and have massive implications for business. This is the difference between sudden fluctuations in the exchange rate and a natural disaster. The former can be dealt with through contingency planning. The latter can must be dealt with by crisis management. Contingency Plans vs. Crisis Management Contingency Planning aims to minimise the impact of foreseeable yet non-critical events. This normally involves gathering detailed information on predictable situations and using computer models to predict. Crisis Management means responding to a sudden event that poses a significant threat to a firm. This involves damage limitation strategies, and places a heavy emphasis on public relations and media relationships. It emphasises the need for a flexible response to any situation and the selection of a crisis team to deal with situations as they arise Effects of Crises on Functional Areas Marketing Public image may be under threat meaning successful PR often forms a major part of managing a crisis Finance Crisis usually requires immediate cash expenditure Operations Customers needs still need to be met, especially if a just in time production system is in place Human Resources Crisis usually requires direct, authoritarian-type leadership in order to issue instructions and make quick decisions. Internal communication should be direct, rapid and open. External communication should be informative, truthful and controlled. Costs Costly activity, can involve high numbers of high qualified staff in assessing risk and planning what to do is things go wrong Like any other form of insurance it reduces risk, but may seem a waste of money if nothing goes wrong (as with the case of the Millennium Bug) Risk Management Business is full of risk. Rehearsing the main ways in which things can go wrong is an important management activity. No matter what size the business is this should be done. Once a companys reputation has been damaged it can take years to restore it because a snowball affect exaggerates the problem. Those companies which assess and manage risk the best are likely to survive the longest

Influences on Change: Leadership

Leadership Deciding on a direction for a company in relation to its objectives, and inspiring staff to achieve those objectives Management Getting things done by organising other people to do it Both leaders and managers are required for effective corporate growth. Risks taken by leaders create opportunities, which through the skills of managers turn into tangible results. Managers have subordinates, while leaders have followers. Managers have a position of authority and their subordinates work for them. A manager tells the subordinates what to do and the subordinates does this because they have been promise a reward. Leaders cant tell people what do as this will not inspire them to follow them. To get people to follow them they have to show how following them will lead to be benefits. A charismatic leader will find it easier to attract people to their cause. Managers tend to avoid risk. They seek to avoid conflict and to run a happy ship. On the other hand, leaders appear to be risk seeking. When pursuing their vision, they find it natural to encounter problems and hurdles that much be overcome on the way. They are more comfortable with risk, and see routes others avoid as potential opportunities for advantages. They will break rules in order to get things done.

Leadership Styles
Leadership styles are concerned with the manner and approach of the head of an organisation or department towards their staff. A leaders manner will affect the personal relationships with the employees - some will inspire loyalty, some respect and some fear. The style will dictate the extent of delegation and employee participation Autocratic /Authoritarian A Taylorite style of leadership in which communication tends to be one way and topdown An authoritarian leadership style assumes information and decision making should be kept at the top of the organisation. They employ formal systems with strict control, giving orders rather than consulting or delegating. This may be the case because leaders have little confidence in their staff, or because they are unable to relinquish power and control. This style takes after McGregors Theory X approach, using rewards for good performance, and penalties for bad performance. The advantages of autocratic leadership is that there are clear lines of authority and it can result in quick decision making, but can cause resentment as there is little employee-participation and the system is very dependent on the leader.

Paternalistic Employees are consulted, but decision making remains at the top This is essentially an approach where leaders decide what is best for their employees. Employees are treated as family there is close supervision, but real attempts are made to gain respect and acceptance of employees. Really it is a type of authoritarian leadership, but with leaders trying to look after what they perceive to be the needs of the subordinates. Leaders are likely to explain the reasons for their decisions and may consult with staff before making the decision, but delegation is unlikely to be encouraged. The main advantage of this style is that workers recognise the employers are trying to support their needs. This reflects Mayos work on human relations and the lower and middle level needs of Maslows model. Democratic Leadership style involving two way communication and considerable delegation Democratic leadership is related to Maslows higher level needs and Herzbergs Motivators. It follows McGregors Theory Y, and means running on the basis of decisions agreed by a majority. This can mean actually voting on issue, but is more likely to mean that leaders delegate a great deal, discuss issues, act on advice and explain the reasons for decisions. Leaders not only delegate but also consult others about their views and take these into account before making a decision. The major advantage is that the participation of workers in decision making allows input from people with relevant skills and knowledge. This may lead to improved morale and better quality decisions. However, it may be slow, and there also may be concern as to where power lies and whether loss of management control is a danger. Laissez-Faire Leadership style that abdicates responsibility and essential takes a hand off approach This approach is where the leader has minimal input in the decision making process and essentially leaves the running of the business to the staff. Delegation occurs in the sense that decisions are left people lower down the hierarchy, but such delegation lacks focus and coordination. This style often arises due to poor leadership and a failure to provide the framework necessary for a successful democratic approach, although it may be a conscious decision to allow staff to use their initiative and demonstrate their capabilities. Some staff will love the freedom to use their initiative and to be creative, whereas others will hate the unstructured nature of their jobs. It can be an effective style when employees are highly skilled and experienced when they take pride in their work and have the drive to do it successfully on their own. It is less effective when it makes employees feel insecure, when leaders fail to provide regular feedback to employees on how well they are doing, and when leaders themselves do not understand their responsibilities and are hoping their employees can cover for them.

Factors Influencing Leadership Style

The following factors influence the leadership style adopted by an organisation. They are mainly internal factors, however the particular situation may be an external factor if it relates to competition or changes in the market. Company Structure. This will affect which leadership styles will be most effective by considering things such as the span on control and whether it is a tall structure. Particular situation. This is perhaps one of the biggest influences. Authoritarian works best during times of crisis, democratic works best during a stable situation with well trained, skilled and experienced staff Organisations culture and tradition. The culture is also affected by the leadership style it works both ways. This is a major influence on the degree and effectiveness of delegation and consultation as it will affect the amount of resistance to change, therefore it affects the ability of new leaders to impose their style on subordinates Nature of the tasks involved. Some tasks will require minimal input from management, whereas other will need to be thought through collectively, taking lots of opinions into account and then choosing the best one. The employees. The skills and abilities of staff will determine whether they require focus from managers or have the ability to get on with their own work, thus influencing leadership style.

The Role of Leadership in Managing Change

Change is a constant feature of business activity. The key issues are whether potential change has been foreseen by the company, have they planned for the change and is it within the companys control. Unforeseen change is a big problem, as it is completely unexpected, therefore hard to plan for. External change is the hardest to control or influence. If a firm cannot influence such change it must ensure that it is prepared to respond quickly and appropriately when it happens, making use of contingency plans. Change Management - The anticipation, organisation, introduction and evaluation of modifications to business strategy and operations A key factor in change management is trust. Managers must give the staff the skills and training to implement changes. The staff must then trust the motives and ability of the managers. Successful change management requires a number of elements. The organisational structure needs to allow change to be implemented effectively, careful management needs to be careful when dealing with redundancies and change, explaining why it is necessary, and appropriate leadership should encourage job enrichment by effective delegation and consultation.

Influences on Change: Culture

Organisational Culture - Unwritten code that affects the attitudes and behaviour of staff, approaches to decision making and the leadership style of the management

Types of Organisational Culture

A key role of organisational culture is to differentiate an organisation from others, and provide a sense of identity for its members who we are, what we do and what we stand for. It is an acquired body of knowledge about how to behave and the shared meanings and symbols that help everyone interpret and understand how to act in the organisation A strong organisation culture is one that is internally consistent, widely shared and makes clear what is expected and how people should behave. Every organisation has its own unique culture, which will have been created unconsciously based on the values of the founders, senior management and core people who built and now direct the organisation. Over time, culture may change as new owners and senior management try to impose their own styles and preferences, but could also be due to changing market place conditions The three main types of organisational culture are power, task and entrepreneurial: Power Culture - Where a powerful individual or small group determines the dominant culture. Culture, power and influence spread out from the central figure or group. Entrepreneurial Culture - Entrepreneurial organisations place an emphasis on results and rewards for individual initiative. They encourage risk taking, and have quantitative and financial goals. They have a flatter and more flexible structure, giving more local control. It is found in smaller businesses, profit centred organisations and conglomerates with local management control. It result in an organisation that is focused on commercial results and profit, and often applies in a businesses early years of development Task Culture - The organisations values are related to a job or project, usually associated with a small team approach. The emphasis is on results and getting things done. Individuals are empowered with independence and control over their work. Such an organisation is flexible and adaptable, as the culture emphasises talent and ideas, which involves continuous team problem solving and consultation. Other types of culture include person (where an organisation exists as a vehicle for people to develop their career/expertise), role (controlled by procedures and titles), and technology/production/marketing orientation.

Reasons for and Problems with Changing Culture

A change in the external environment may require changes in the way things are done. If not, the way things are done could actually hinder the business. When the existing culture is challenged, it can produce strong resistance from within the organisation, as the fundamental values of staff are under threat. In bringing about cultural change, the role of the leader or senior management is crucial. Leaders and senior management act as role models. If they say one thing and do the opposite, nobody will take the culture change seriously and it will quickly lose creditability. The leaders and managers themselves have to be seen to be making a change. They can introduce training and recruitment, restructure the organisation, allocate resources differently, and promote/demote staff in order to bring about a change of culture.

Importance of Organisational Culture

Organisational culture is important because it determines how firms respond to changes in their external environment. Though intangible, it has a bearing on the behaviour and performance of staff. A product or engineering based culture can lead to a neglect of marketing skills and financial controls. Over concern with financial controls can undermine product development, leaving the firm increasingly exposed to competition product Culture influences the extent to which a business is centralised or decentralised and whether it has a narrow or tall hierarchical structure. Culture is also influenced by organisational structure (works both ways). It is influential when it comes to developing mission statements, as well as effecting leadership styles, meaning it will have a major effect on the degree and effectiveness of delegation and consultation. It will also affect the amount of resistance to change, therefore the ability of new management to impose its style or decisions on subordinates. There is no right or wrong culture. The most appropriate approach depends on the nature of the business and the environment in which it operates. When takeovers and mergers occur, firms with very different cultures are brought together, which could lead to managerial confusion and failure. Differences in culture can be an important factor in the success of a takeover or merger. Culture needs to be appropriate to the environment it operates in, as failure can often be linked to the wrong organisational culture.

Making Strategic Decisions

Information Management
The application of management techniques to collect information, communicate within and outside the organisation, and process it to enable managers to make quicker and better decisions

The use of information management improves an organisations ability to process information and make decisions. Despite this, information management does have some limitations most notably, cost. Other than this, it is not always possible or desirable to access, collect and evaluate every piece of information or evidence that is relevant for making a certain decision at a reasonable price in terms of time and effort. Also, established organisational rules and procedures, organisational culture and the attitudes of leadership might prevent the optimal decision from being made anyway.

Different Approaches to Decision Making

Decision making in any business is very important. It takes place at every level, and varies from short term to long term, as well as functional and tactical to strategic and corporate. Most include an element of risk. This doesnt mean the option shouldnt be pursued, but does mean that careful analysis of the balance of risk and reward should be carried out. Scientific Approach - A logical and research based approach to decision making This approach to decision making involves using a systematic process for making decisions in an objective manner. It eliminates the practice of decisions being made on hunches and tries to removed bias and subjectivity by ensuring decisions are made on the basis of well researched factual evidence. This should reduce risk, as decisions are based on data. It allows actions to be reviewed and the most effective course of action to be decided, however doesnt mean it will always be the right one. It can be criticised as being a slow process that lacks creativity and can fail to lead to innovative and different approaches The Scientific Model involves the following stages; setting objectives, gathering data, analysing data, selecting a strategy, and implementing and reviewing the decision. Provides a clear sense of direction by emphasising the need to set objectives it ensure that people involved are aiming for the same goals Decisions are based on business logic Likely that more than one person will be involved in the process so will reduce bias Ensures that decisions are monitored continually and reviewed Decisions are based on rational thinking Easier to defend a policy which has been developed on the basis of good planning

Intuitive Approach - A gut feeling held by a manager that is based not on scientific decision making but on the personal views of the manager This method of decision making involves individuals making decisions on the basis of a hunch. It is more likely to be used by small businesses who do not have the resources to carry out more scientific-based decisions, but can also be appropriate if the person has a great deal of experience and expertise, and may lead to more creative and innovative decision making. This approach is not always informed by evidence and will often involve a level of bias and subjectivity, leading to inappropriate or ill-judged outcomes. Scientific method requires a large collection of data and the regular gathering of data to control and review decisions. This can be costly Less time consuming Data collected for scientific method could quickly go out of date Decisions may be better if they rely on the instincts of a manager who has a qualitative understanding of the market and can anticipate a change in the trend Choosing the Decision Making Approach The following factors need to be considered when deciding whether to use a scientific or intuitive based approach to making a decision: o Speed of the decision. Where quick decisions are required, there may be insufficient time to analyse the situation and so hunched may be followed o Information available. Where detailed data is not available, hunches and guesswork are more likely to be used o Size of the business. Smaller businesses are more likely to follow a hunch as theyre decisions are simpler o Predictability of the situation. A hunch may be best in an unpredictable situation o Character of the person or the culture of the company. An entrepreneurial risk taker is more likely to use hunches

Decision Trees
Decision trees are used where numerical data is available and for which the probability of different consequences and the financial outcomes can be estimated. They map out different options, along with the possible outcomes of these options. Calculations can be used to determine the best option for the business. However, caution must be taken when using decision trees, as you have to take into account the accuracy of the numbers inputted. Evaluating Decision Trees Once the quantitative analysis using a decision tree has been completed, a business needs to consider the following points; how reliable were the figures used, what market research has been done and how effective is this, and are there other non-quantifiable factors that might affect the decision?

Advantages They set out the problem clearly and encourage a logical approach to decision making They encourage careful consideration of all alternatives They encourage a quantitative approach that may improve the results and also means that the process can be computerised They are useful when similar scenarios have occurred before, so that realistic estimates of probabilities and financial returns can be made They are useful when making tactical or routine decisions rather than strategic decisions

Disadvantages They ignore the constantly changing nature of the business environment It is quite easy for management bias to influence the estimates of probabilities and financial returns, and for managers to manipulate data They are less useful in relation to completely new decisions or problems and one off strategic decisions or problems Few decisions can be made on a purely objective basis; most include a subjective element based on managerial experience and intuition They may lead to managers taking less account of important qualitative issue

Influences on Corporate Decision Making

The three main influences on corporate decision making are as follows: Ethical positions A decision made on ethical ground might reject the most profitable solution in favour of one that provides great benefits to society as a whole. Such decision making is likely to in distinguish ethically driven and profit driven companies, however some business may adopt a seemingly ethical position that is popular with consumer in order to increase sales. Resources Resources available have a huge influence on corporate plans and thus on corporate decisions. If a company is unable to generate sufficient financial resources this will affect its corporate decision making, as some options simply wont be available. The same can be said for human resources. Relative Power of the Stakeholders The relative power of individual stakeholder groups and their influence on decision making depends on the nature of the business. In some small, family businesses, the interests of the shareholders may be the major influence, some businesss decisions will be subject to their customers, and others to the local community.

Implementing and Managing Change

Techniques
Techniques to implement and manage change often focus on an area of change as a project, hence the terms project champions, management and groups. External consultants and specialists also can help implement and manage change. Project Champions A project champion is someone who promotes the benefits of pursuing the project, while also justifying the organisations investment. They are not a formal project team member, but someone who believes strongly in the projects goals and values. They have two essential roles: To advocate and promote the benefits of pursuing the project. The project champion actively seeks project support from management and other organisational leaders To assist the project when it encounters barriers, such as funding constraints or problems with resource allocation Desirable characteristics of a project champion is status within the organisation that ensures they carry weight in the organisational decision making process, a real commitment to pursuing support for the project with the organisation, good people skills, and the ability to build relationships easily.

Project Groups/Management Good project management means that things get done, on time, within budget and meet or exceed the expectations of the business. Projects of any size and complexity can be planned by computer - critical path analysis is an integral tool. Project management is not only about planning, but also about resource management and human attributes like leadership, team work and motivation Project groups and project management have grown rapidly, as industry and commerce have realise that much of what business does is project work or the management and implementation of change. One reason for their rapid growth is the need to understand how to look after complex projects, which are critical to business success, but also have to use scarce resources efficiently. The work of project groups provides opportunities for job enlargement as workers are often allowed to take on a variety of different tasks within the group. They also benefit from the specialist skills of individual group member, which can increase productivity and the possibility of success. Close project group working can also create synergy.

External Consultants and Specialists External consultants and specialists are often brought in when an organisation does not have sufficient expertise itself or when its management needs to remain focused on existing business. It is generally agreed that effective change management is best driven by people in the organisation undergoing change, but they may be supported, where necessary, by external specialists.

Factors that Promote and Resist Change

A lack of clear objectives or sense of mission or purpose will not help the change process. Appropriate and sufficient resources will be necessary if change is to be implemented and managed successfully. Appropriate trained staff with relevant expertise are necessary during the change process to ensure it is successful In addition to the above, the following factors also promote or limit change: o Resistance to change. Can impede the ability of a business to serve its customers, to innovate for the future, or to capitalise on a new initiative o Planning. Should consider all possible implications of a proposed initiative, the development of a plan for information and training and a map for on-going monitoring of the new environment o Impact on people employed in the business and how the business deals with this. Different people react differently to change and change often involves losses, meaning the business has a lot to deal with o Effectiveness of teams in the organisation and the skills and commitment of the people involved o Organisational structure. Flat team structure often most appropriate for implementing and managing change successfully o External factors. Such as competitors actions or changes in the economy