STRATEGIC DECISION MAKING

Pearson BTEC Level 5 in Management and

Leadership (QCF)

Table of Contents 1. Understand the role of information in strategic decision making ............................................ 2

Information ................................................................................................................................................................. 2

Type of information ................................................................................................................................................ 3

Competitive advantage ......................................................................................................................................... 5

Four Methods of Competitive Advantages ................................................................................................ 6

How to Evaluate Corporate Strategy ............................................................................................................ 7

Information systems ............................................................................................................................................ 21

Effective Communication Networking ....................................................................................................... 22

Types of Networks for Business .................................................................................................................... 23

Management information systems .............................................................................................................. 23

MIS AND SMALL BUSINESS .............................................................................................................................. 24

Decision Support System – DSS .................................................................................................................... 25

2. Understand how information systems support business activity ........................................... 26

Planning ....................................................................................................................................................................... 26

Formulating plans .................................................................................................................................................. 27

Goal setting ............................................................................................................................................................... 28

5 Characteristics of Successful Goal Setting ......................................................................................... 29

Decision making ...................................................................................................................................................... 30

3. Understand quantitative approaches to strategic decision making ...................................... 33

Quantitative approaches ................................................................................................................................... 33

Game Theory ............................................................................................................................................................. 34

Performance evaluation review technique & CPM ............................................................................. 36

Limitations ................................................................................................................................................................. 37

4. Understand systems approaches to strategic decision making ............................................... 42

Systems approaches ............................................................................................................................................ 42

Soft systems methodology ............................................................................................................................... 43

Strategic options development and analysis ......................................................................................... 44

Critical systems heuristics ................................................................................................................................ 45

Decision making theories .................................................................................................................................. 48

Contingency theory ............................................................................................................................................... 50

Contingency Theory of Organization .......................................................................................................... 51

Limitations of decision making theories .................................................................................................. 53

1. Understand the role of information in strategic decision

making

Information Information quality (IQ) is the quality of the content of information systems. It is often

pragmatically defined as: "The fitness for use of the information provided."

Conceptual problems

Although this pragmatic definition is usable for most everyday purposes, specialists often use

more complex models for information quality. Most information system practitioners use the

term synonymously with data quality. However, as many academics make a distinction

between data and information, some will insist on a distinction between data quality and

information quality. This distinction would be akin to the distinction

between syntax and semantics where for example, the semantic value of "one" could be

expressed in different syntaxes like 00001; 1.0000; 01.0; or 1. Thus a data difference may not

necessarily represent poor information quality.

Information quality assurance is the process to guarantee confidence that particular information

meets some context specific quality requirements. It has been suggested, however, that higher

the quality the greater will be the confidence in meeting more general, less specific contexts.

Dimensions and metrics of information quality

"Information quality" is a measure of the value which the information provides to the user of

that information. "Quality" is often perceived as subjective and the quality of information can

then vary among users and among uses of the information. Nevertheless, a high degree of

quality increases its objectivity or at least the inter subjectivity. Accuracy can be seen as just

one element of IQ but, depending upon how it is defined, can also be seen as encompassing

many other dimensions of quality.

If not, it is perceived that often there is a trade-off between accuracy and other dimensions,

aspects or elements of the information determining its suitability for any given tasks. Wang and

Strong propose a list of dimensions or elements used in assessing Information Quality is:

Intrinsic IQ: accuracy, objectivity, Believability, reputation

Contextual IQ: relevance, value-added, Timeliness, Completeness, amount of information Representational IQ: interpretability, format, coherence, compatibility Accessibility IQ: accessibility, access security

Other authors propose similar but different lists of dimensions for analysis, and emphasize

measurement and reporting as information quality metrics. Larry English prefers the term

"characteristics" to dimensions. In fact, a considerable amount of information quality research

involves investigating and describing various categories of desirable attributes (or dimensions) of

data. Research has recently shown the huge diversity of terms and classification structures used.

While information as a distinct term has various ambiguous definitions, there's one which is

more general, such as "description of events". While the occurrences being described cannot be

subjectively evaluated for quality, since they're very much autonomous events in space and

time, their description can—since it possesses a garnishment attribute, unavoidably attached by

the medium which carried the information, from the initial moment of the occurrences being

described.

In an attempt to deal with this natural phenomenon, qualified professionals primarily

representing the researchers' guild, have at one point or another identified particular metrics for

information quality. They could also be described as 'quality traits' of information, since they're

not so easily quantified, but rather subjectively identified on an individual basis.

Context of information quality in organizations

Information quality dimensions are perceived to be differently important by different users. For

instance, drawing on Porter's value chain, employees working in primary activities of the value

chain as compared to employees working in secondary activities perceive information quality

criteria differentially important. As such, primary areas perceive timeliness more important than

secondary areas. Further, IT and HR staff perceive security of information more important than

other functional areas. However, IT staff perceives completeness as less important than other

areas. Thus, it is important for managers to consider different user perspectives when working

on improving information quality.

The general satisfaction level with the data at hand can also influence the relevance judgment of

information quality dimensions. Among the following criteria, security and conciseness were

influenced strongest by employees' general satisfaction levels:

Accessible

Accurate

Believable

Complete

Concise

Consistently Represented

Secure

Timely

The eight criteria above have also been mentioned in trade-off relationships in literature. For

instance, if management improves security of information, it may need to be traded-off for

accessibility.

Type of information

Successful organizations use information systems to collect data and process it according to the

needs of the analyst, manager or business owner. Businesses operate more efficiently by using

varied information systems to interact with customers and partners, curtail costs and generate

revenues. Successful organizations large and small leverage available technologies to manage

business activities and assist in making decisions. They use information systems to collect data

and process it according to the needs of the analyst, manager or business owner. Businesses

operate more efficiently by using varied information systems to interact with customers and

partners, curtail costs and generate revenues.

Transaction Processing Systems

Transaction processing systems meet the data collection, storage, processing and outputting

functionalities for the core operations of a business. TPS information systems collect data from

user inputs and then generate outputs based on the data collected. An example of TPS system

could be an online air ticket booking system. In such a system, travelers select their flight

schedule and favorite seats (the input), and the system updates the seats available list,

removing those selected by the traveler (the processing). The system then generates a bill and a

copy of the ticket (the output). TPS information systems can be based on real-time or batch

processing, and can help business owners meet demand without acquiring additional personnel.

Customer Relationship Management Systems

Business owners use customer relationship systems to synchronize sales and marketing efforts.

CRM systems accumulate and track customer activities, including purchasing trends, product

defects and customer inquiries. The capabilities of typically CRM information systems allow

customers to interact with companies for service or product feedback and problem resolutions.

Businesses may also use CRM systems internally as a component of their collaboration

strategies. As such, CRM information systems allow business partners to interact with each other

as they develop ideas and products. Collaboration can occur in real time even when business

partners are in remote locations.

Business Intelligence Systems

Business intelligence systems can be complex as they identify, extract and analyze data for

various operational needs, particularly for decision-making purposes. BIS information systems

may provide analyses that predict future sales patterns, summarize current costs and forecast

sales revenues. Business intelligence systems collect data from the various data warehouses in

an organization and provide management with analyses according to lines of business,

department or any breakdown that management desires. For example, financial institutions use

BIS systems to develop credit risk models that analyze the number and extent of lending or

credit given to various sectors. These systems may use various techniques and formulas to

determine the probability of loan defaults.

Knowledge Management Systems

Knowledge management systems organize and dissect knowledge and then redistribute or share

it with individuals of an organization. The purpose of these information systems is to bring

innovation, improve performance, bring integration and retain knowledge within the

organization. Although KMS information systems are typically marketed to larger enterprises,

small businesses can also benefit from harvesting knowledge. KMS information systems serve as

a central repository and retain information in a standard format. These systems can help

business owners maintain consistency and enable speedy responses to customer and partner

inquiries.

Management Information System

Small-business managers and owners rely on an industry-specific management information

system, or MIS, to get current and historical operational performance data, such as sales and

inventories data. Periodically, the MIS can create prescheduled reports, which company

management can use in strategic, tactical and operational planning and operations. For example,

an MIS report may be a pie chart that illustrates product sales volume by territory or a graph

that illustrates the percentage increase or decrease in a product's sales over time. Small-

business managers and owners also rely on the MIS to conduct “what-if” ad hoc analyses. For

example, a manager might use the system to determine the potential effect on shipping

schedules if monthly sales doubled.

Decision Support System

A decision-support system, or DSS, allows small-business managers and owners to use

predefined or ad hoc reports to support operations planning and problem-resolution decisions.

With DSS, users find answers to specific questions as a means to evaluate the possible impact of

a decision before it is implemented. The answers to queries may take the form of a data

summary report, such as a product revenue by quarter sales report. To conduct an analysis,

business owners and managers use an interface -- a dashboard -- to select a particular graphic

representation of a key performance indicator that measures the progress toward meeting a

specific goal. For example, a manufacturing dashboard might display a graphic representing the

number of products manufactured on a particular line.

Executive Support System

The executive support system, or ESS, contains predefined reports that help small-business

owners and managers identify long-term trends in support of strategic planning and no routine

decision making. System users click on any icon displayed on the ESS screen and enter report

criteria to view individual predefined reports and graphs, which are based on companywide and

functional department data, such as sales, scheduling and cost accounting. The ESS reports brief

the business manager or owner on an issue, such as market trends and buyer preferences. The

ESS system also offers analysis tools used to predict outcomes, assess performance and

calculate statistics based on existing data.

Competitive advantage

Businesses are always looking for a competitive advantage, a way to stand apart from the

masses and to offer something that's just right for a specific target audience. Therein lies the

secret. Competitive advantage requires identifying a specific target audience with a clearly

defined need, developing and delivering a high-quality and appropriately priced product or

service and doing it better than anybody else.

Target Audience with Clearly Defined Need

Effective business strategy begins with focusing on the particular needs of a target audience.

Cooks who wanted a faster way to cook food welcomed the microwave. Busy people on the

move wanting a fast, affordable way to communicate with others embraced the cell phone.

Businesses that are able to identify an audience and meet their needs better than their

competitors will find themselves with a clear competitive advantage.

Delivering a High-Quality Service

Competitive advantage means just that: being better than the other available alternatives that

your target audience has and, in the process, achieving an advantage. It's not enough to be

"just as good as" the competition. Successful strategic advantage falls to those who can deliver

a product or service that is better in some way and that is more meaningful to the target

audience, says Lin Grensing-Pophal, a marketing consultant and the author of "Marketing with

the End in Mind." High-quality is defined differently by different people, she says, and

encompasses all elements of the marketing mix—product, price, place (or access) and

promotion.

An Appropriate Price

Determining an appropriate price depends on the market and the competitive strategy that the

business has selected. Is a Starbucks coffee worth $4 to $5? It is if Starbucks customers are

willing to pay that much. Starbucks caters to a different audience than McDonald's, for instance,

which sells coffee for much less. Appropriate price will be determined by the competitive position

that a company hopes to achieve relative to its competitors and the weight of its brand image.

Being the Best

Being the best—at whatever it is—is the key to achieving competitive advantage for a business.

Whether that means the best price, the easiest access, the best quality or the best service,

successful companies find a way to differentiate themselves from the masses.

Four Methods of Competitive Advantages

Businesses are constantly seeking competitive advantages in the marketplace. There are many

different ways in which this can be done, but many will focus on a few tried and true methods of

gaining a leg up on the competition. These methods can generally be classified into about four

different primary categories. Both Stanford University and the University of Cambridge cite

Michael Porter's broad and narrow categories of competitive strategies as the basis for

understanding how businesses try to compete.

Cost Leadership

Cost leadership is the first competitive advantage businesses often attempt to gain. Cost

leadership as an advantage occurs when a business is able to offer the same quality product as

its competitors, but at a lower price. Cost leadership can occur when a company finds ways to

produce goods at a lower cost through the perfection of production methods or by the utilization

of resources in a more efficient manner than competitors. Other factors, such as proprietary

technology, can also factor into this type of advantage. Cost leadership may be classified as an

offensive strategy, whereby businesses attempt to drive competitors out of the market by

consistently using price strategies designed to win over consumers.

Differentiation

Differentiation is a second strategy that businesses often use to set themselves apart from

competitors. In a differentiation strategy, low cost is only one of many possible factors that may

set aside a business from others. Business that differentiate themselves typically look for one or

more marketable attributes that they have that can set them apart from their competitors. They

then find the segment of the market that finds those attributes important and market to them.

The process can also work in the other direction with businesses conducting research to

determine which things consumers find most important and then developing a niche market for

those products or characteristics.

Defensive Strategies

Another way for a business to gain a competitive advantage is to utilize a defensive strategy.

The advantage gained by this type of strategy is that it allows the business to further distance

itself from its competition by, in some sense, maintaining a competitive advantage it has gained.

Therefore, this strategy is closely related to differentiation and cost leadership because it is a

method used by businesses to keep those advantages in place once they have been attained.

Whereas the other two strategies are more offensive in nature, this strategy becomes an actual

advantage as it becomes increasingly difficult for so-called competitors to offer any real

opposition to the business.

Alliances

Competitive advantages can also be gained by businesses that seek strategic alliances with

other businesses in related industries or within the same industry. Businesses have to be careful

not to cross the line between alliances and collusion, though. Collusion occurs when businesses

within the same industry work together to artificially control prices. Strategic alliances, on the

other hand, are more along the lines of joint ventures that businesses use to pool resources and

gain themselves exposure at the expense of other competitors not in the alliance.

How to Evaluate Corporate Strategy

No good military officer would undertake even a small-scale attack on a limited objective without

a clear concept of his strategy. No seasoned politician would undertake a campaign for a major

office without an equally clear concept of his strategy. In the field of business management,

however, we frequently find men deploying resources on a large scale without any clear notion

of what their strategy is. And yet a company’s strategy is a vital ingredient in determining its

future. A valid strategy will yield growth, profit, or whatever other objectives the managers have

established. An inappropriate strategy not only will fail to yield benefits, but also may result in

disaster.

In this article I will try to demonstrate the truth of these contentions by examining the

experiences of a number of companies. I shall discuss what strategy is, how it can be evaluated,

and how, by evaluating its strategy, a management can do much to assure the future of the

enterprise.

Decisive Impact

The influence of strategy can be seen in every age and in every area of industry. Here are some

examples:

From the time it was started in 1911 as the Computing-Tabulating-Recording Co., International

Business Machines Corporation has demonstrated the significance of a soundly conceived

strategy. Seeing itself in the data-system business at a time when most manufacturers were still

preoccupied with individual pieces of equipment, IBM developed a set of policies which resulted

in its dominating the office equipment industry.

By contrast, Packard in the 1930’s was to the automobile industry everything that IBM is today

to the office machine industry. In 1937, it sold over 109,000 cars, compared with about 11,000

for Cadillac. By 1954 it had disappeared as an independent producer.

Strategy is, of course, not the only factor determining a company’s success or failure. The

competence of its managerial leadership is significant as well. Luck can be a factor, too

(although often what people call good luck is really the product of good strategy). But a valid

strategy can gain extraordinary results for the company whose general level of competence is

only average. And, conversely, the most inspiring leaders who are locked into an inappropriate

strategy will have to exert their full competence and energy merely in order to keep from losing

ground.

When Hannibal inflicted the humiliating defeat on the Roman army at Cannae in 216 b.c., he led

a ragged band against soldiers who were in possession of superior arms, better training, and

competent “noncoms.” His strategy, however, was so superior that all of those advantages

proved to be relatively insignificant. Similarly, when Jacob Borowsky made Lestoil the hottest-

selling detergent in New England some years ago, he was performing a similar feat—relying on

strategy to battle competition with superior resources.

Strategy is important not only for aspiring Davids who need an offensive device to combat

corporate Goliaths. It is significant also for the large organization faced with a wide range of

choice in domestic and international operations. For instance, the following corporations are all

in the midst of strategic changes, the implications of which are worldwide in scope:

Massey-Ferguson, Ltd., with 26 factories located around the world, and vying for

leadership in the farm-equipment industry.

General Electric Company and Westinghouse Electric Corporation, the giant producers

of electrical equipment who are recasting their competitive policies.

Singer Sewing Machine Company, trying to make its vast assets yield a greater return.

Dynamic Concept

A strategy is a set of goals and major policies. The definition is as simple as that. But while the

notion of a strategy is extremely easy to grasp, working out an agreed-upon statement for a

given company can be a fundamental contribution to the organization’s future success.

In order to develop such a statement, managers must be able to identify precisely what is meant

by a goal and what is meant by a major policy. Otherwise, the process of strategy determination

may degenerate into what it so often becomes—the solemn recording of platitudes, useless for

either the clarification of direction or the achievement of consensus.

Identifying Goals

Corporate goals are an indication of what the company as a whole is trying to achieve and

to become. Both parts—the achieving and the becoming—are important for a full understanding

of what a company hopes to attain. For example:

Under the leadership of Alfred Sloan, General Motors achieved a considerable degree of

external success; this was accomplished because Sloan worked out a pattern for the

kind of company he wanted it to be internally.

Similarly, the remarkable record of Du Pont in the twentieth century and the growth of

Sears, Roebuck under Julius Rosenwald were as much a tribute to their modified

structure as to their external strategy.1

Achieving.

In order to state what a company expects to achieve, it is important to state what it hopes to do

with respect to its environment. For instance:

Ernest Breech, chairman of the board of the Ford Motor Company, said that the strategy

formulated by his company in 1946 was based on a desire “to hold our own in what we foresaw

would be a rich but hotly competitive market.”2 The view of the environment implicit in this

statement is unmistakable: an expanding overall demand, increasing competition, and emphasis

on market share as a measure of performance against competitors.

Clearly, a statement of what a company hopes to achieve may be much more varied and

complex than can be contained in a single sentence. This will be especially true for those

managers who are sophisticated enough to perceive that a company operates in more external

“systems” than the market. The firm is part not only of a market but also of an industry, the

community, the economy, and other systems. In each case there are unique relationships to

observe (e.g., with competitors, municipal leaders, Congress, and so on). A more complete

discussion of this point is contained in a previous HBR article.3

Becoming.

If you ask young men what they want to accomplish by the time they are 40, the answers you

get fall into two distinct categories. There are those—the great majority—who will respond in

terms of what they want to have. This is especially true of graduate students of business

administration. There are some men, however, who will answer in terms of the kind of men they

hope to be. These are the only ones who have a clear idea of where they are going.

The same is true of companies. For far too many companies, what little thinking goes on about

the future is done primarily in money terms. There is nothing wrong with financial planning.

Most companies should do more of it. But there is a basic fallacy in confusing a financial plan

with thinking about the kind of company you want yours to become. It is like saying, “When I’m

40, I’m going to be rich.” It leaves too many basic questions unanswered. Rich in what way?

Rich doing what?

The other major fallacy in stating what you want to become is to say it only in terms of a

product. The number of companies who have got themselves into trouble by falling in love with a

particular product is distressingly great.4 Perhaps the saddest examples are those giants of

American industry who defined their future in terms of continuing to be the major suppliers of

steam locomotives to the nation’s railroads. In fact, these companies were so wedded to this

concept of their future that they formed a cartel in order to keep General Motors out of the

steam locomotive business. When the diesel locomotive proved its superiority to steam, these

companies all but disappeared.

The lesson of these experiences is that a key element of setting goals is the ability to see them

in terms of more than a single dimension. Both money and product policy are part of a

statement of objectives; but it is essential that these be viewed as the concrete expressions of a

more abstract set of goals—the satisfaction of the needs of significant groups which cooperate to

ensure the company’s continued existence.

Who are these groups? There are many—customers, managers, employees, stockholders, to

mention just the major ones. The key to corporate success is the company’s ability to identify

the important needs of each of these groups, to establish some balance among them, and to

work out a set of operating policies which permits their satisfaction. This set of policies, as a

pattern, identifies what the company is trying to be.

The Growth Fad

Many managers have a view of their company’s future which is strikingly analogous to the child’s

view of himself. When asked what they want their companies to become over the next few

years, they reply, “bigger.”

There are a great many rationalizations for this preoccupation with growth. Probably the one

most frequently voiced is that which says, “You have to grow or die.” What must be appreciated,

however, is that “bigger” for a company has enormous implications for management. It involves

a different way of life, and one which many managers may not be suited for—either in terms of

temperament or skills.

Moreover, whether for a large company or a small one, “bigger,” by itself, may not make

economic sense. Companies which are highly profitable at their present size may grow into

bankruptcy very easily; witness the case of Grayson-Robinson Stores, Inc., a chain of retail

stores. Starting out as a small but profitable chain, it grew rapidly into receivership. Conversely,

a company which is not now profitable may more successfully seek its survival in cost reduction

than in sales growth. Chrysler is a striking example of this approach.

There is, in the United States, a business philosophy which reflects the frontier heritage of the

country. It is one which places a high value on growth, in physical terms. The manager whose

corporate sales are not increasing, the number of whose subordinates is not growing, whose

plants are not expanding, feels that he is not successful. But there is a dangerous trap in this

kind of thinking. More of the same is not necessarily progress. In addition, few managers are

capable of running units several times larger than the ones they now head. The great danger of

wholehearted consumer acceptance or an astute program of corporate acquisition is that it

frequently propels managers into situations that are beyond their present competence. Such

cases—and they are legion—emphasize that in stating corporate objectives, bigger is not always

better. A dramatic example is that of the Ampex Corporation:

From 1950 to 1960, Ampex’s annual sales went from less than $1,000,000 to more

than $73,000,000. Its earnings went from $115,000 to nearly $4,000,000. The following year,

the company reported a decline in sales to $70,000,000, and a net loss of $3,900,000. The Wall

Street Journal reported: “As one source close to the company put it, Ampex’s former

management ‘was intelligent and well-educated, but simply lacked the experience necessary to

control’ the company’s rapid development.”5

Role of Policy

A policy says something about how goals will be attained. It is what statisticians would call a

“decision rule,” and what systems engineers would call a “standing plan.” It tells people what

they should and should not do in order to contribute to achievement of corporate goals.

A policy should be more than just a platitude. It should be a helpful guide to making strategy

explicit, and providing direction to subordinates. Consequently, the more definite it is, the more

helpful it can be. “We will provide our stockholders with a fair return,” is a policy no one could

possibly disagree with—or be helped by. What isa fair return? This is the type of question that

must be answered before the company’s intentions become clear.

The job of management is not merely the preparation of valid policies for a standard set of

activities; it is the much more challenging one of first deciding what activities are so strategically

significant that explicit decision-rules in that area are mandatory. No standard set of policies can

be considered major for all companies. Each company is a unique situation. It must decide for

itself which aspects of corporate life are most relevant to its own aspirations and work out policy

statements for them. For example, advertising may be insignificant to a company which provides

research services to the Defense Department, but critical to a firm trying to mass-merchandise

luxury goods.

It is difficult to generalize about which policies are major, even within a particular industry,

because a number of extraordinarily successful companies appear to violate all the rules. To

illustrate:

In the candy industry it would seem safe to generalize that advertising should be a major policy

area. However, the Hershey Company, which is so successful that its name is practically the

generic term for the product, has persistently followed a policy of no advertising.

Similarly, in the field of high-fidelity components, one would expect that dealer relations would

be a critical policy area. But Acoustics Research, Inc., has built an enviable record of sales

growth and of profitability by relying entirely on consumer pull.

Need to Be Explicit

The first thing to be said about corporate strategy is that having one is a step forward. Any

strategy, once made explicit, can quickly be evaluated and improved. But if no attempt is ever

made to commit it to paper, there is always the danger that the strategy is either incomplete or

misunderstood.

Many successful companies are not aware of the strategy that underlies their success. It is quite

possible for a company to achieve initial success without real awareness of its causes. However,

it is much more difficult to successfully branch out into new ventureswithout a precise

appreciation of their strategic significance. This is why many established companies fail

miserably when they attempt a program of corporate acquisition, product diversification, or

market expansion. One illustration of this is cited by Myles L. Mace and George G. Montgomery

in their recent study of corporate acquisitions:

“A basic resin company…bought a plastic boat manufacturer because this seemed to present a

controlled market for a portion of the resin it produced. It soon found that the boat business was

considerably different from the manufacture and sale of basic chemicals. After a short but

unpleasant experience in manufacturing and trying to market what was essentially a consumer’s

item, the management concluded that its experience and abilities lay essentially in industrial

rather than consumer-type products.”6

Another reason for making strategy explicit is the assistance it provides for delegation and for

coordination. To an ever-increasing extent, management is a team activity, whereby groups of

executives contribute to corporate success. Making strategy explicit makes it far easier for each

executive to appreciate what the overall goals are, and what his own contribution to them must

be.

Making an Evaluation

Is your strategy right for you? There are six criteria on which to base an answer. These are:

1. Internal consistency.

2. Consistency with the environment.

3. Appropriateness in the light of available resources.

4. Satisfactory degree of risk.

5. Appropriate time horizon.

6. Workability.

If all of these criteria are met, you have a strategy that is right for you. This is as much as can

be asked. There is no such thing as a good strategy in any absolute, objective sense. In the

remainder of this article I shall discuss the criteria in some detail.

1. Is the Strategy Internally Consistent?

Internal consistency refers to the cumulative impact of individual policies on corporate goals. In

a well-worked-out strategy, each policy fits into an integrated pattern. It should be judged not

only in terms of itself, but also in terms of how it relates to other policies which the company has

established and to the goals it is pursuing.

In a dynamic company consistency can never be taken for granted. For example:

Many family-owned organizations pursue a pair of policies which soon become inconsistent:

rapid expansion and retention of exclusive family control of the firm. If they are successful in

expanding, the need for additional financing soon raises major problems concerning the extent

to which exclusive family control can be maintained.

While this pair of policies is especially prevalent among smaller firms, it is by no means limited

to them. The Ford Motor Company after World War II and the New York Times today are

examples of quite large, family-controlled organizations that have had to reconcile the two

conflicting aims.

The criterion of internal consistency is an especially important one for evaluating strategies

because it identifies those areas where strategic choices will eventually have to be made. An

inconsistent strategy does not necessarily mean that the company is currently in difficulty. But it

does mean that unless management keeps its eye on a particular area of operation, it may well

find itself forced to make a choice without enough time either to search for or to prepare

attractive alternatives

Is the Strategy Consistent With the Environment?

A firm which has a certain product policy, price policy, or advertising policy is saying that it has

chosen to relate itself to its customers—actual and potential—in a certain way. Similarly, its

policies with respect to government contracts, collective bargaining, foreign investment, and so

forth are expressions of relationship with other groups and forces. Hence an important test of

strategy is whether the chosen policies are consistent with the environment—whether they really

make sense with respect to what is going on outside.

Consistency with the environment has both a static and a dynamic aspect. In a static sense, it

implies judging the efficacy of policies with respect to the environment as it exists now. In a

dynamic sense, it means judging the efficacy of policies with respect to the environment as it

appears to be changing. One purpose of a viable strategy is to ensure the long-run success of an

organization. Since the environment of a company is constantly changing, ensuring success over

the long run means that management must constantly be assessing the degree to which policies

previously established are consistent with the environment as it exists now; and whether current

policies take into account the environment as it will be in the future. In one sense, therefore,

establishing a strategy is like aiming at a moving target: you have to be concerned not only with

present position but also with the speed and direction of movement.

Failure to have a strategy consistent with the environment can be costly to the organization.

Ford’s sad experience with the Edsel is by now a textbook example of such failure. Certainly, had

Ford pushed the Falcon at the time when it was pushing the Edsel, and with the same resources,

it would have a far stronger position in the world automobile market today.

Illustrations of strategies that have not been consistent with the environment are easy to find by

using hindsight. But the reason that such examples are plentiful is not that foresight is difficult

to apply. It is because even today few companies are seriously engaged in analyzing

environmental trends and using this intelligence as a basis for managing their own futures.

Is the Strategy Appropriate in View of the Available Resources?

Resources are those things that a company is or has and that help it to achieve its corporate

objectives. Included are money, competence, and facilities; but these by no means complete the

list. In companies selling consumer goods, for example, the major resource may be the name of

the product. In any case, there are two basic issues which management must decide in relating

strategy and resources. These are:

What are our critical resources?

Is the proposed strategy appropriate for available resources?

Let us look now at what is meant by a “critical resource” and at how the criterion of resource

utilization can be used as a basis for evaluating strategy.

Critical Resources

The essential strategic attribute of resources is that they represent action potential. Taken

together, a company’s resources represent its capacity to respond to threats and opportunities

that may be perceived in the environment. In other words, resources are the bundle of chips

that the company has to play with in the serious game of business.

From an action-potential point of view, a resource may be critical in two senses: (1) as the

factor limiting the achievement of corporate goals; and (2) as that which the company will

exploit as the basis for its strategy. Thus, critical resources are both what the company has most

of and what it has least of.

The three resources most frequently identified as critical are money, competence, and physical

facilities. Let us look at the strategic significance of each.

Money.

Money is a particularly valuable resource because it provides the greatest flexibility of response

to events as they arise. It may be considered the “safest” resource, in that safety may be

equated with the freedom to choose from among the widest variety of future alternatives.

Companies that wish to reduce their short-run risk will therefore attempt to accumulate the

greatest reservoir of funds they can.

However, it is important to remember that while the accumulation of funds may offer short-run

security, it may place the company at a serious competitive disadvantage with respect to other

companies which are following a higher-risk course.

The classical illustration of this kind of outcome is the strategy pursued by Montgomery Ward

under the late Sewell Avery. As reported in Fortune:

“While Sears confidently bet on a new and expanding America, Avery developed an idée fixe that

postwar inflation would end in a crash no less serious than that of 1929. Following this idea, he

opened no new stores but rather piled up cash to the ceiling in preparation for an economic

debacle that never came. In these years, Ward’s balance sheet gave a somewhat misleading

picture of its prospects. Net earnings remained respectably high, and were generally higher than

those of Sears as a percentage of sales. In 1946, earnings after taxes were $52 million. They

rose to $74 million in 1950, and then declined to $35 million in 1954. Meanwhile, however, sales

remained static, and in Avery’s administration profits and liquidity were maintained at the

expense of growth. In 1954, Ward had $327 million in cash and securities, $147 million in

receivables, and $216 million in inventory, giving it a total current-asset position of $690 million

and net worth of $639 million. It was liquid, all right, but it was also the shell of a once great

company.”7

Competence.

Organizations survive because they are good at doing those things which are necessary to keep

them alive. However, the degree of competence of a given organization is by no means uniform

across the broad range of skills necessary to stay in business. Some companies are particularly

good at marketing, others especially good at engineering, still others depend primarily on their

financial sophistication. Philip Selznick refers to that which a company is particularly good at as

its “distinctive competence.”8

In determining a strategy, management must carefully appraise its own skill profile in order to

determine where its strengths and weaknesses lie. It must then adopt a strategy which makes

the greatest use of its strengths. To illustrate:

The competence of The New York Times lies primarily in giving extensive and insightful coverage

of events—the ability to report “all the news that’s fit to print.” It is neither highly profitable

(earning only 1.5% of revenues in 1960—far less than, say, the Wall Street Journal), nor

aggressively sold. Its decision to publish a West Coast and an international edition is a gamble

that the strength of its “distinctive competence” will make it accepted even outside of New York.

Because of a declining demand for soft coal, many producers of soft coal are diversifying into

other fields. All of them, however, are remaining true to some central skill that they have

developed over the years. For instance:

Consolidation Coal is moving from simply the mining of soft coal to the mining and

transportation of soft coal. It is planning with Texas Eastern Transmission Corporation

to build a $100-million pipeline that would carry a mixture of powdered coal and water

from West Virginia to the East Coast.

North American Coal Company, on the other hand, is moving toward becoming a

chemical company. It recently joined with Strategic Materials Corporation to perfect a

process for extracting aluminum sulfate from the mine shale that North American

produces in its coal-running operations.

James L. Hamilton, president of the Island Creek Coal Co., has summed up the concept of

distinctive competence in a colorful way:

“We are a career company dedicated to coal, and we have some very definite ideas about

growth and expansion within the industry. We’re not thinking of buying a cotton mill and starting

to make shirts.”9

Physical facilities.

Physical facilities are the resource whose strategic influence is perhaps most frequently

misunderstood. Managers seem to be divided among those, usually technical men, who are

enamored of physical facilities as the tangible symbol of the corporate entity; and those, usually

financial men, who view physical facilities as an undesirable but necessary freezing of part of the

company’s funds. The latter group is dominant. In many companies, return on investment has

emerged as virtually the sole criterion for deciding whether or not a particular facility should be

acquired.

Actually, this is putting the cart before the horse. Physical facilities have significance primarily in

relationship to overall corporate strategy. It is, therefore, only in relationship to other aspects of

corporate strategy that the acquisition or disposition of physical facilities can be determined. The

total investment required and the projected return on it have a place in this determination—but

only as an indication of the financial implications of a particular strategic decision and not as an

exclusive criterion for its own sake.

Any appraisal of a company’s physical facilities as a strategic resource must consider the

relationship of the company to its environment. Facilities have no intrinsic value for their own

sake. Their value to the company is either in their location relative to markets, to sources of

labor, or to materials; or in their efficiency relative to existing or impending competitive

installations. Thus, the essential considerations in any decision regarding physical facilities are a

projection of changes likely to occur in the environment and a prediction about what the

company’s responses to these are likely to be.

Here are two examples of the necessity for relating an evaluation of facilities to environmental

changes:

Following the end of World War II, all domestic producers of typewriters in the United

States invested heavily in plant facilities in this country. They hypothesized a rapid

increase of sales throughout the world. This indeed took place, but it was short-lived.

The rise of vigorous overseas competitors, especially Olivetti and Olympia, went hand

in hand with a booming overseas market. At home, IBM’s electric typewriter took more

and more of the domestic market. Squeezed between these two pressures, the rest of

the U.S. typewriter industry found itself with a great deal of excess capacity following

the Korean conflict. Excess capacity is today still a major problem in this field.

The steady decline in the number of farms in the United States and the emergence of

vigorous overseas competition have forced most domestic full-line manufacturers of

farm equipment to sharply curtail total plant area. For example, in less than four

years, International Harvester eliminated more than a third of its capacity (as

measured in square feet of plant space) for the production of farm machinery.

The close relationship between physical facilities and environmental trends emphasizes one of

the most significant attributes of fixed assets—their temporal utility. Accounting practice

recognizes this in its treatment of depreciation allowances. But even when the tax laws permit

generous write-offs, they should not be used as the sole basis for setting the time period over

which the investment must be justified. Environmental considerations may reveal that a different

time horizon is more relevant for strategy determination. To illustrate again:

As Armstrong Cork Company moved away from natural cork to synthetic materials during the

early 1950’s, management considered buying facilities for the production of its raw materials—

particularly polyvinyl chloride. However, before doing so, it surveyed the chemical industry and

concluded that producers were overbuilding. It therefore decided not to invest in facilities for the

manufacture of this material. The projections were valid; since 1956 polyvinyl chloride has

dropped 50% in price.

A strategic approach to facilities may not only change the time horizon; it may also change the

whole basis of asset valuation:

Recently a substantial portion of Loew’s theaters was acquired by the Tisch brothers, owners and

operators of a number of successful hotels, including the Americana in Florida.10 As long as the

assets of Loew’s theaters were viewed only as places for the projection of films, its theaters,

however conservatively valued, seemed to be not much of a bargain. But to a keen appraiser of

hotel properties the theater sites, on rather expensive real estate in downtown city areas, had

considerable appeal. Whether this appraisal will be borne out is as yet unknown. At any rate, the

stock, which was originally purchased at $14 (with a book value of $22), was selling at $23 in

October 1962.

Achieving the Right Balance

One of the most difficult issues in strategy determination is that of achieving a balance between

strategic goals and available resources. This requires a set of necessarily empirical, but critical,

estimates of the total resources required to achieve particular objectives, the rate at which they

will have to be committed, and the likelihood that they will be available. The most common

errors are either to fail to make these estimates at all or to be excessively optimistic about

them.

One example of the unfortunate results of being wrong on these estimates is the case of Royal

McBee and the computer market:

In January 1956 Royal McBee and the General Precision Equipment Corporation formed a jointly

owned company—the Royal Precision Corporation—to enter the market for electronic data-

processing equipment. This joint operation was a logical pooling of complementary talents.

General Precision had a great deal of experience in developing and producing computers. Its

Librascope Division had been selling them to the government for years. However, it lacked a

commercial distribution system. Royal McBee, on the other hand, had a great deal of experience

in marketing data-processing equipment, but lacked the technical competence to develop and

produce a computer.

The joint venture was eminently successful, and within a short time the Royal Precision LPG-30

was the leader in the small-computer field. However, the very success of the computer venture

caused Royal McBee some serious problems. The success of the Royal Precision subsidiary

demanded that the partners put more and more money into it. This was no problem for General

Precision, but it became an ever more serious problem for Royal McBee, which found itself in an

increasingly critical cash bind. In March 1962 it sold its interest in Royal Precision to General

Precision for $5 million—a price which represented a reported $6.9 million loss on the

investment. Concluding that it simply did not have sufficient resources to stay with the new

venture, it decided to return to its traditional strengths: typewriters and simple data-processing

systems.

Another place where optimistic estimates of resources frequently cause problems is in small

businesses. Surveys of the causes of small-business failure reveal that a most frequent cause of

bankruptcy is inadequate resources to weather either the early period of establishment or

unforeseen downturns in business conditions.

It is apparent from the preceding discussion that a critical strategic decision involves deciding:

(1) how much of the company’s resources to commit to opportunities currently perceived, and

(2) how much to keep uncommitted as a reserve against the appearance of unanticipated

demands. This decision is closely related to two other criteria for the evaluation of strategy: risk

and timing. I shall now discuss these.

Does the Strategy Involve an Acceptable Degree of Risk?

Strategy and resources, taken together, determine the degree of risk which the company is

undertaking. This is a critical managerial choice. For example, when the old Underwood

Corporation decided to enter the computer field, it was making what might have been an

extremely astute strategic choice. However, the fact that it ran out of money before it could

accomplish anything in that field turned its pursuit of opportunity into the prelude to disaster.

This is not to say that the strategy was “bad.” However, the course of action pursued was a

high-risk strategy. Had it been successful, the payoff would have been lush. The fact that it was

a stupendous failure instead does not mean that it was senseless to take the gamble.

Each company must decide for itself how much risk it wants to live with. In attempting to assess

the degree of risk associated with a particular strategy, management may use a variety of

techniques. For example, mathematicians have developed an elegant set of techniques for

choosing among a variety of strategies where you are willing to estimate the payoffs and the

probabilities associated with them. However, our concern here is not with these quantitative

aspects but with the identification of some qualitative factors which may serve as a rough basis

for evaluating the degree of risk inherent in a strategy. These factors are:

1. The amount of resources (on which the strategy is based) whose continued existence or value

is not assured.

2. The length of the time periods to which resources are committed.

3. The proportion of resources committed to a single venture.

The greater these quantities, the greater the degree of risk that is involved.

Uncertain Term of Existence

Since a strategy is based on resources, any resource which may disappear before the payoff has

been obtained may constitute a danger to the organization. Resources may disappear for various

reasons. For example, they may lose their value. This frequently happens to such resources as

physical facilities and product features. Again, they may be accidentally destroyed. The most

vulnerable resource here is competence. The possible crash of the company plane or the blip on

the president’s electrocardiogram are what make many organizations essentially speculative

ventures. In fact, one of the critical attributes of highly centralized organizations is that the more

centralized they are, the more speculative they are. The disappearance of the top executive, or

the disruption of communication with him, may wreak havoc at subordinate levels.

However, for many companies, the possibility that critical resources may lose their value stems

not so much from internal developments as from shifts in the environment. Take specialized

production know-how, for example. It has value only because of demand for the product by

customers—and customers may change their minds. This is cause for acute concern among the

increasing number of companies whose futures depend so heavily on their ability to participate

in defense contracts. A familiar case is the plight of the airframe industry following World War II.

Some of the companies succeeded in making the shift from aircraft to missiles, but this has only

resulted in their being faced with the same problem on a larger scale.

Duration of Commitment

Financial analysts often look at the ratio of fixed assets to current assets in order to assess the

extent to which resources are committed to long-term programs. This may or may not give a

satisfactory answer. How important are the assets? When will they be paid for?

The reasons for the risk increasing as the time for payoff increases is, of course, the inherent

uncertainty in any venture. Resources committed over long time spans make the company

vulnerable to changes in the environment. Since the difficulty of predicting such changes

increases as the time span increases, long-term projects are basically more risky than are short

ones. This is especially true of companies whose environments are unstable. And today, either

because of technological, political, or economic shifts, most companies are decidedly in the

category of those that face major upheaval in their corporate environments. The company

building its future around technological equipment, the company selling primarily to the

government, the company investing in underdeveloped nations, the company selling to the

Common Market, the company with a plant in the South—all these have this prospect in

common.

The harsh dilemma of modern management is that the time span of decision is increasing at the

same time as the corporate environment is becoming increasingly unstable. It is this dilemma

which places such a premium on the manager’s sensitivity to external trends today. Much has

been written about his role as a commander and administrator. But it is no less important that

he be a strategist.

Size of the Stakes

The more of its resources a company commits to a particular strategy, the more pronounced the

consequences. If the strategy is successful, the payoff will be great—both to managers and

investors. If the strategy fails, the consequences will be dire—both to managers and investors.

Thus, a critical decision for the executive group is: What proportion of available resources should

be committed to a particular course of action?

This decision may be handled in a variety of ways. For example, faced with a project that

requires more of its resources than it is willing to commit, a company either may choose to

refrain from undertaking the project or, alternatively, may seek to reduce the total resources

required by undertaking a joint venture or by going the route of merger or acquisition in order to

broaden the resource base.

The amount of resources management stands ready to commit is of particular significance where

there is some likelihood that larger competitors, having greater resources, may choose to enter

the company’s field. Thus, those companies which entered the small-computer field in the past

few years are now faced with the penetration into this area of the data-processing giants. (Both

IBM and Remington Rand have recently introduced new small computers.)

I do not mean to imply that the “best” strategy is the one with the least risk. High payoffs are

frequently associated with high-risk strategies. Moreover, it is a frequent but dangerous

assumption to think that inaction, or lack of change, is a low-risk strategy. Failure to exploit its

resources to the fullest may well be the riskiest strategy of all that an organization may pursue,

as Montgomery Ward and other companies have amply demonstrated.

Does the Strategy Have an Appropriate Time Horizon?

A significant part of every strategy is the time horizon on which it is based. A viable strategy not

only reveals what goals are to be accomplished; it says something about when the aims are to

be achieved.

Goals, like resources, have time-based utility. A new product developed, a plant put on stream,

a degree of market penetration, become significant strategic objectives only if accomplished by a

certain time. Delay may deprive them of all strategic significance. A perfect example of this in

the military sphere is the Sinai campaign of 1956. The strategic objective of the Israelis was not

only to conquer the entire Sinai peninsula; it also was to do it in seven days. By contrast, the

lethargic movement of the British troops made the operation a futile one for both England and

France.

In choosing an appropriate time horizon, we must pay careful attention to the goals being

pursued, and to the particular organization involved. Goals must be established far enough in

advance to allow the organization to adjust to them. Organizations, like ships, cannot be “spun

on a dime.” Consequently, the larger the organization, the further its strategic time horizon must

extend, since its adjustment time is longer. It is no mere managerial whim that the major

contributions to long-range planning have emerged from the larger organizations—especially

those large organizations such as Lockheed, North American Aviation, and RCA that traditionally

have had to deal with highly unstable environments.

The observation that large corporations plan far ahead while small ones can get away without

doing so has frequently been made. However, the significance of planning for the small but

growing company has frequently been overlooked. As a company gets bigger, it must not only

change the way it operates; it must also steadily push ahead its time horizon—and this is a

difficult thing to do. The manager who has built a successful enterprise by his skill at “putting

out fires” or the wheeler-dealer whose firm has grown by a quick succession of financial coups is

seldom able to make the transition to the long look ahead.

In many cases, even if the executive were inclined to take a longer range view of events, the

formal reward system seriously militates against doing so. In most companies the system of

management rewards is closely related to currently reported profits. Where this is the case,

executives may understandably be so preoccupied with reporting a profit year by year that they

fail to spend as much time as they should in managing the company’s long-term future. But if

we seriously accept the thesis that the essence of managerial responsibility is the extended time

lapse between decision and result, currently reported profits are hardly a reasonable basis on

which to compensate top executives. Such a basis simply serves to shorten the time horizon

with which the executive is concerned.

The importance of an extended time horizon derives not only from the fact that an organization

changes slowly and needs time to work through basic modifications in its strategy; it derives

also from the fact that there is a considerable advantage in a certain consistency of strategy

maintained over long periods of time. The great danger to companies which do not carefully

formulate strategies well in advance is that they are prone to fling themselves toward chaos by

drastic changes in policy—and in personnel—at frequent intervals. A parade of presidents is a

clear indication of a board that has not really decided what its strategy should be. It is a

common harbinger of serious corporate difficulty as well.

The time horizon is also important because of its impact on the selection of policies. The greater

the time horizon, the greater the range in choice of tactics. If, for instance, the goals desired

must be achieved in a relatively short time, steps like acquisition and merger may become

virtually mandatory. An interesting illustration is the decision of National Cash Register to enter

the market for electronic data-processing equipment. As reported in Forbes:

“Once committed to EDP, NCR wasted no time. To buy talent and experience in 1953 it acquired

Computer Research Corp. of Hawthorne, California… For speed’s sake, the manufacture of the

394’s central units was turned over to GE… NCR’s research and development outlays also began

curving steeply upwards.”11

Is the Strategy Workable?

At first glance, it would seem that the simplest way to evaluate a corporate strategy is the

completely pragmatic one of asking: Does it work? However, further reflection should reveal that

if we try to answer that question, we are immediately faced with a quest for criteria. What is the

evidence of a strategy “working”?

Quantitative indices of performance are a good start, but they really measure the influence of

two critical factors combined: the strategy selected and the skill with which it is being executed.

Faced with the failure to achieve anticipated results, both of these influences must be critically

examined. One interesting illustration of this is a recent survey of the Chrysler Corporation after

it suffered a period of serious loss:

“In 1959, during one of the frequent reorganizations at Chrysler Corp., aimed at halting the

company’s slide, a management consultant concluded: ‘The only thing wrong with Chrysler is

people. The corporation needs some good top executives.’ ”12

By contrast, when Olivetti acquired the Underwood Corporation, it was able to reduce the cost of

producing typewriters by one-third. And it did it without changing any of the top people in the

production group. However, it did introduce a drastically revised set of policies.

If a strategy cannot be evaluated by results alone, there are some other indications that may be

used to assess its contribution to corporate progress:

The degree of consensus which exists among executives concerning corporate goals and

policies.

The extent to which major areas of managerial choice are identified in advance, while

there is still time to explore a variety of alternatives.

The extent to which resource requirements are discovered well before the last minute,

necessitating neither crash programs of cost reduction nor the elimination of planned

programs. The widespread popularity of the meat-axe approach to cost reduction is a

clear indication of the frequent failure of corporate strategic planning.

Information systems Building a network of business connections has always been a vital part of running a business.

With the Internet, you have a broader set of tools to expand your network. Yet while networking

over the Web gives you opportunity to connect with people around the world, there is a value to

face-to-face meetings that can’t be overlooked. A business network depends on a combination of

electronic and personal exchanges.

1. Sign up for business networking sites, such as LinkedIn, Plaxo, Ecademy and Focus.

Actively participate in forums, submit articles, and respond to any postings from others about

what you’ve written. Keep your responses in a cooperative tone that shows you’re willing to help

others and eager to learn from colleagues about business issues. LinkedIn and Plaxo are built

around making business-to-business connections, so when you do publicly respond to a posting,

also send a request to the person who posted the comment to add him to your online network.

Include a personal message rather than just the default message provided by the network site.

The personal message shows you’re genuinely interested.

2. Create a Facebook page for your business. Facebook allows you to connect with

consumers with a far more varied background than the people you connect with on business-to-

business sites. Facebook not only can drive customers to your business, it can provide a broader

insight into your market, and create serendipitous yet beneficial connections with people you

wouldn’t otherwise contact.

3. Go old school and exchange business cards. Business cards are still keenly important to

secure contact information for people you meet at conferences, sales meetings, or a chance

encounter at lunch. Follow up electronically by requesting connections through a business

networking site.

4. Ask colleagues and contacts to introduce you to people they think you should know. A

"Harvard Business Review" article from December 2005 on building business networks contends

that if you introduced yourself to too many of your contacts, your contact list can be “too

inbred.” You would have likely chosen people who resemble you in training, experience and

interests. That can limit your access to differing points of view, yet those differences are crucial

to creativity, problem solving and opportunity. Other people providing introductions for you

expands your horizon.

5. Join and become active in two associations. SCORE, a business counseling service

associated with the Small Business Administration and made up of active and retired executives,

suggests joining two kinds of associations, one directly related to your field, and one of a more

general business nature. The first allows you to meet with experts in your market. The second

lets you mingle with entrepreneurs from all areas. Each kind of contact is valuable.

6. Maintain your contacts. Updating your profile on business networking sites lets your

contacts automatically know what you’ve been up to. When one of your contacts updates her

profile about a promotion, new endeavor, or other professional change, send an e-mail or give a

call of congratulations. For contacts within your community, ask them to lunch. Do the same

with contacts in cities where your business travel takes you. When you face a problem, ask one

of your contacts for advice. Don’t let your contacts go inert by just sitting in a database.

Effective Communication Networking

Effective networking is a skill that successful businesspeople seem to come by naturally.

However, if you ask them about their talent, they'll tell you that there is a method to their

madness. Effective networkers have a goal, know their audience and are concerned more with

the needs and interests of others than themselves. Networking has a history that extends from

conversations over backyard fences to boardrooms and online social media sites.

What Is Networking?

Networking can be defined as the process of reaching out to others to build relationships that

can be used for mutual gain, says Lin Grensing-Pophal, author of "The Essentials of Corporate

Communications and Public Relations." Networking is the building of personal and professional

connections in a variety of ways ranging from old-fashioned one-on-one connections made in

conference rooms to media-based connections, such as those made online.

The Benefits of Networking

Networking enables a participant to build connections that serve as useful references or referrals

for jobs and other business opportunities. Networking can result in connections being made with

individuals who can share information and insights related to their areas of expertise.

Networking can also yield social benefits; many people who network online find that they're able

to connect with and meet online colleagues as they travel to business events around the

country. Programs like Jigsaw (www.Jigsaw.com) and MeetUp (www.meetup.com) make this

interaction easier than ever before.

The Drawbacks of Networking

While networking can yield many benefits, there are some drawbacks. Chief among them can be

the time it takes to build strong relationships with others, whether in-person or online. Another

drawback can be the expectation of reciprocity that may exist if, for instance, a contact helps

you land a key account and is now looking for a referral from you. Another challenge can be

juggling the sheer number of contacts that can emerge online. British anthropologist Robin

Dunbar has been cited as the source of data which suggests that the maximum number of

contacts we can effectively maintain relationships with is around 150.

Best Practices in Networking

Effective networkers point to a number of best practices that help them obtain maximum

effectiveness from their networking efforts in either traditional or online settings. First and

foremost is having a goal for networking, or a specific purpose for making connections. When

going to a business meeting, for instance, consider ahead of time what your networking goal will

be. Then identify the specific audience you wish to connect with; this may vary based on your

networking objective. Most importantly, says Grensing-Pophal, think more about what you have

to give than what you have to gain from networking. Ineffective networkers can come across as

insincere or self-aggrandizing, which can turn off those whom they most wish to connect with. A

sincere interest in others is key, as is follow-up after the meeting to stay in touch by offering

information that your new connection will find useful.

The Future of Networking

Social media has had a significant impact on networking opportunities. In the past, it would have

been literally impossible to quickly and inexpensively develop relationships with people across

the country or even around the world. However, social networking now makes this

communication possible. It is not likely that online networking will ever replace the value of in-

person connections, but it is certainly true that it will continue to be an important method of

augmenting those relationships and building new ones.

Types of Networks for Business

Networking has been a crucial aspect of business for much longer than informational technology

has existed. Salesmen need clients, upstarts need investors, and never has it been easier to find

the right people than it is now.

Smartphones

There was a time when a professional was only as good as his Rolodex was large, and he was

tied to his desk with a spiraled cord usually stretched far beyond its elastic limit. Now that bulky

box of contact cards has been replaced with digital contact lists, which are stored inside of their

smartphones. Smartphones are cell phones that are no longer bound to just making and

receiving phone calls. You can check email, surf the Web, make appointments and keep in

contact with clients from wherever you may be. These types of phones allow you to be on a

global network and allow your business to move at astonishing speeds.

LAN and WAN

Local Area Networks (LAN) are networks that connect all the personal computers in an institution

to a central hub, which is usually a server. LANs are so commonplace that even most suburban

households utilize them. These networks optimize the speed of communication as they run

independently of the Internet.

Users can store and share information over a LAN, thus reducing the time spent uploading or

downloading. Some institutions will even localize their email protocol so that they are not

vulnerable to viruses or other forms of malware that otherwise always seems to find its way into

a system. Since LANs have proven to be so effective, most companies have invested in a Wide

Area Network (WAN), which has similar functionality, but with a much wider range. Some

retailers have connected their cash registers to a nationwide WAN in order to track sales in real

time.

Social Networks

Social networks are not just for the kids anymore. As students graduate and become part of the

work force, many of them continue to use the social networking websites they had in high school

and college. MySpace set the standard, but Facebook has become the benchmark, as it built its

reputation while being affiliated exclusively with educational institutions. Two upstarts that have

jumped on the bandwagon and taken a much more professional approach include LinkedIn and

ELance. LinkdIn is very much like Facebook, except it cuts the social part out of social

networking. On its site, you can create a profile based on your professional experiences and

education, post a resume and find others in your industry to build up your contacts. ELance is a

community of professionals looking for contract work. Users build a profile and submit samples

of their work, and those in need of services can search for and chose the perfect candidate.

Management information systems

A management information system (MIS) is a computerized database of financial information

organized and programmed in such a way that it produces regular reports on operations for

every level of management in a company. It is usually also possible to obtain special reports

from the system easily. The main purpose of the MIS is to give managers feedback about their

own performance; top management can monitor the company as a whole. Information displayed

by the MIS typically shows "actual" data over against "planned" results and results from a year

before; thus it measures progress against goals. The MIS receives data from company units and

functions. Some of the data are collected automatically from computer-linked check-out

counters; others are keyed in at periodic intervals. Routine reports are preprogrammed and run

at intervals or on demand while others are obtained using built-in query languages; display

functions built into the system are used by managers to check on status at desk-side computers

connected to the MIS by networks. Many sophisticated systems also monitor and display the

performance of the company's stock.

MIS AND SMALL BUSINESS If MIS is defined as a computer-based coherent arrangement of information aiding the

management function, a small business running even a single computer appropriately equipped

and connected is operating a management information system. The term used to be restricted to

large systems running on mainframes, but that dated concept is no longer meaningful. A medical

practice with a single doctor running software for billing customers, scheduling appointments,

connected by the Internet to a network of insurance companies, cross-linked to accounting

software capable of cutting checks is de facto an MIS. In the same vein a small manufacturer's

rep organization with three principals on the road and an administrative manager at the home

office has an MIS system, that system becomes the link between all the parts. It can link to the

inventory systems, handle accounting, and serves as the base of communications with each rep,

each one carrying a laptop. Virtually all small businesses engaged in consulting, marketing,

sales, research, communications, and other service industries have large computer networks on

which they deploy substantial databases. MIS has come of age and has become an integral part

of small business.

But while virtually every company now uses computers, not all have as yet undertaken the kind

of integration described above. To take the last step, however, has become much easier-

;provided that good reasons are present for doing so. The motivation for organizing information

better usually comes from disorder-;ordering again what has already been ordered, and sitting

in boxes somewhere, because the company controls its inventory poorly. Motivation may arise

also from hearing about others who are exploiting some resource, like a customer list, while the

owner's own list is in sixteen pieces all over the place. There are sometimes also reasons

for not automating things too much: in modern times a business can grind to a dead halt

because "the network is down."

Upgrading the information system usually begins by identifying some kind of a problem and then

seeking a solution. In that process a knowledgeable resource-person brought in from the outside

can provide a great deal of help. If the problem is over-stocking, for example, solving that

problem will often become the starting point for a new information system touching on many

other aspects of the business. The first question a consultant is likely to ask will concern how

things are managed now. In the description of the process, the discovery of potential solutions

will begin. It is usually a good idea to call on two or three service firms for initial consultations;

these rarely cost any money. Once the owner feels comfortable with one of these vendors, the

process can then be deepened.

The business owner has the option of buying various software packages for various problems

and then gradually linking them into a system with the help of a value-added reseller (VAR) or a

systems integrator. This solution is probably best for the small business with fewer than 50

employees. Larger companies may in addition also want to explore options offered by application

services providers or management service providers (ASPs and MSPs respectively, collectively

referred to as xSPs) in installing ERP systems and providing Web services. ASPs deliver high-end

business applications to a user from a central web site. MSPs offer on-site or Web-based

systems management services to a company.

ERP stands for "enterprise resource planning," a class of systems that integrate manufacturing,

purchasing, inventory management, and financial data into a single system with or without Web

capabilities. ERPs are very popular with larger and midsized firms but were increasingly

penetrating the small business sector as well in the mid-2000s.

Decision Support System – DSS

A decision support system (DSS) is a computerized information system used to support decision-

making in an organization or a business. A DSS lets users sift through and analyze massive

reams of data and compile information that can be used to solve problems and make better

decisions.

The benefits of decision support systems include more informed decision-making, timely problem

solving and improved efficiency for dealing with problems with rapidly changing variables.

BREAKING DOWN 'Decision Support System - DSS'

A DSS can be used by operations management and planning levels in an organization to compile

information and data and synthesize it into actionable intelligence. This allows the end user to

make more informed decisions at a quicker pace.

What Can a DSS Analyze?

The DSS is an information application that produces comprehensive information. This is different

from an operations application, which would be used to collect the data in the first place. A DSS

is primarily used by mid- to upper-level management, and it is key for understanding large

amounts of data.

For example, a DSS could be used to project a company's revenue over the upcoming six

months based on new assumptions about product sales. Due to the large amount of variables

that surround the projected revenue figures, this is not a straightforward calculation that can be

done by hand. A DSS can integrate multiple variables and generate an outcome and alternate

outcomes, all based on the company's past product sales data and current variables.

How Can a DSS Present the Information?

The primary purpose of using a DSS is to present information to the customer in a way that is

easy to understand. A DSS system is beneficial because it can be programed to generate many

types of reports, all based on user specifications. A DSS can generate information and output it

graphically, such as a bar chart that represents projected revenue, or as a written report.

Where Can a DSS Be Used?

As technology continues to advance, data analysis is no longer limited to large bulky

mainframes. Since a DSS is essentially an application, it can be loaded on most computer

systems, including laptops. Certain DSS applications are also available through mobile devices.

The flexibility of the DSS is extremely beneficial for customers who travel frequently. This gives

them the opportunity to be well-informed at all times, which in turn provides them with the

ability to make the best decisions for their company and customers at any time.

2. Understand how information systems support business

activity

Planning Decision-making is a vital part of the business world. Even a low-level supervisor makes several

decisions in a work day, and with some companies, decision-making is encouraged among

workers on the line. Unlike CEOs and managers of large companies, the small business owner is

largely responsible for the ultimate outcome of all decisions with regard to her company.

Workforce Decisions

For a small business owner, each individual decision regarding the workforce will have much

more impact than on a large company. Long-term strategic decisions, like increasing or cutting

back the company's workforce, can make or break the company. In a small business even

individual hires can have an impact, as a good employee can increase productivity and be good

for staff chemistry, while a poor employee can do real damage.

Employee Input

Modern small businesses can benefit from the input of their employees in decision making.

Especially in small companies, input on decisions can improve morale. However, someone along

the chain of command must make the final decisions, whether by herself or by committee.

Having a process in place for making the final decision once all input is collected is imperative.

Decisiveness Leads to Good Morale

Employees notice whether a boss makes tentative decisions. If a supervisor is decisive about

making her decisions, chances are she's decisive about her whole approach to management, and

the employees will respect that. Even a wrong decision, made with conviction, often gets high

marks from employees. Customers and stockholders also notice how a manager makes

decisions.

Decisions That Take Time

Some questions require more time for a decision. Generally, the decisions that can't be undone

without great cost -- in money or time -- need to be approached slowly. A decision on whether

to expand requires much research and consideration of alternatives, and a later change of

direction can be expensive.

Quick Decisions

Some decisions should be made quickly. Unfortunately, those are the ones that some business

owners may agonize over for days or weeks.

If a decision can be changed or undone without great cost, then it can be made quickly. The

company can go broke while top management oscillates between using one office supply

company over another.

Formulating plans

Strategy formulation refers to the process of choosing the most appropriate course of action for

the realization of organizational goals and objectives and thereby achieving the organizational

vision. The process of strategy formulation basically involves six main steps. Though

these steps do not follow a rigid chronological order, however they are very rational and can be

easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to

set the long-term objectives of the organization. It is known that strategy is generally a

medium for realization of organizational objectives. Objectives stress the state of being

there whereas Strategy stresses upon the process of reaching there. Strategy includes

both the fixation of objectives as well the medium to be used to realize those objectives.

Thus, strategy is a wider term which believes in the manner of deployment of resources

so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence the

selection of objectives must be analyzed before the selection of objectives. Once the objectives

and the factors influencing strategic decisions have been determined, it is easy to take strategic

decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general

economic and industrial environment in which the organization operates. This includes a

review of the organizations competitive position. It is essential to conduct a qualitative

and quantitative review of an organizations existing product line. The purpose of such a

review is to make sure that the factors important for competitive success in the market

can be discovered so that the management can identify their own strengths and

weaknesses as well as their competitors’ strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of

competitors’ moves and actions so as to discover probable opportunities of threats to its market

or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the

quantitative target values for some of the organizational objectives. The idea behind this

is to compare with long term customers, so as to evaluate the contribution that might be

made by various product zones or operating departments.

4. Aiming in context with the divisional plans - In this step, the contributions made by

each department or division or product category within the organization is identified and

accordingly strategic planning is done for each sub-unit. This requires a careful analysis of

macroeconomic trends.

5. Performance Analysis - Performance analysis includes discovering and analyzing the

gap between the planned or desired performance. A critical evaluation of the organizations

past performance, present condition and the desired future conditions must be done by

the organization. This critical evaluation identifies the degree of gap that persists between

the actual reality and the long-term aspirations of the organization. An attempt is made

by the organization to estimate its probable future condition if the current trends persist.

6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course

of action is actually chosen after considering organizational goals, organizational

strengths, potential and limitations as well as the external opportunities.

Goal setting

Goals are an important component to achieving success in any endeavor, including the world of

business. Goals serve as a guide to keep you on course when times get tough, and prevent you

from becoming distracted by unimportant matters. Goals also provide benefits in areas like

planning, motivation and the attainment of rapid results.

Providing Direction

Goals can provide a future direction for your business, which helps guide you and your

employees in everyday decision-making processes. For example, if your goal is to keep office

expenses for the year to a minimum, you can resist the temptation to purchase a piece of

discounted office equipment unless it is necessary. If your goal is to expand your business, you

can decide to use the income generated by gaining a large client to build an addition to your

workplace.

Facilitating Planning

Goals help you in the planning stages for your business. You may establish a goal of increasing

sales by 25 percent in the coming year, but, upon further reflection, realize that this can't

happen given the current size of your sales force. Therefore, part of your planning may include

hiring two new salespeople within the next 60 days.

Motivating Employees

According to the Reference for Business website, goals can also be used as a motivational tool

for your employees. If you're looking to increase sales, you can implement an incentive program

where your salespeople receive a cash reward for achieving specific objectives. You can also

offer an incentive to all employees if your business is able to reduce expenses by a specific

percentage.

Limiting Stress

According to Livestrong.com, goals can help reduce stress. Without goals to guide you, you may

develop a tendency to jump from one project or task to another instead of focusing on the most

important needs of your business. As a result, you may come to realize that your overall

production is suffering and you'll be wondering what you're actually accomplishing, creating a

sense of worry.

Quicker Results

When you establish a goal, you should also create a step-by-step plan to accomplish that goal.

This can help you achieve a task more quickly, as there can be less of a tendency to veer off

course. You'll waste less time on insignificant or unproductive actions and take a more direct

route to the accomplishment of the goal. If your goal is to increase sales from your existing

customer base, for example, you won't waste time prospecting for new business.

5 Characteristics of Successful Goal Setting

Remember the word “SMART” and you will know the five characteristics of successful goal

setting. Successful goals are Specific, Measurable, Achievable, Realistic and Timely. Research

conducted on goal-setting theory by Dr. Edwin A. Locke of the University of Maryland helped

develop this approach which has helped individuals in the business world successfully plan goals

for over 25 years.

Specific

Goals must call for specific actions, behaviors or events to be successfully met. Individuals must

define their desired results within each goal statement using a proactive voice. For example, "I

will increase my savings deposits by $50 per week in order to fund my summer trip to Europe.”

Goals should contain no more than two sentences and should establish what, where and why.

Measurable

Goals must be measurable to assure success. When setting goals, it is important to describe how

each result will be measured. In our example we set clear steps and timelines. Our action step

involves increasing deposits by an established amount. We set measurable tracking points by

establishing a weekly timeline. If goals are not measurable, individuals cannot track their

progress. Goals set successfully always answer the question “How can I measure my success?”

Achievable

Goals must be achievable. A person cannot become a doctor if he has not been graduated from

medical school, nor can a business increase its sales if it does not have an advertising budget. In

a savings-related goal like our example, a person must ask himself whether the goal is

achievable with his current resources. When creating a goal, ask yourself whether you have the

skills, tools and resources needed to achieve the goal.

Realistic

Taking a realistic approach is perhaps one of the most important characteristics of successful

goal setting. Goals challenge us to achieve or attain what is important to us. For us to maintain

motivation levels and avoid frustration, goals must also be realistic. In the example goal, if we

could not afford to save the $50 dollars a week, then we would face hardship and would not

reach our goal by summer. Realistic goals are honest goals. Goals established thoughtfully can

challenge us, but are not set beyond our natural abilities. Setting realistic goals involves asking

"Is this possible?”

Timely

Successful goal setting must set forth measurable points for starting, ending, review and

assessment. A successful goal has deadlines and endings. In our example, we set a weekly

period goal and an end goal of summer. Open-ended goals often fail because individuals have

not have set dates to review, measure and revise.

Decision making If you're the type of person who shies away from making an important decision in a timely

fashion, you'll have to resolve that issue before you start your small business. Decision-making

is an extremely significant element of successfully managing a company. Educate yourself on the

process of making effective management decisions for your company.

Significance

As the owner or manager of a small business, you are the point person for all major decisions

regarding the company. That includes hiring decisions, investments in advertising or promotions,

and decisions related to overall direction of the business. Managing your decision-making

process is also an important element of project management for you and your employees.

Techniques

You can approach the decision-making process from a number of perspectives. You can make

your decision after conducting a benefit versus cost analysis; if the benefits outweigh the cost,

that indicates the choice might be the right decision. You can also use a modeling technique as

another way to make your decisions, which allows you to make your final choice based on a

chart or visual model. For instance, flowcharts or decision trees are helpful tools for managers in

the decision-making process. Forecasting, the process of making future predictions about the

business or industry based on research and trends, can also help you make important business

decisions.

Types

You may face a number of specific dilemmas when making decisions for your business, as some

choices do not always have simple yes or no answers. For instance, you may have made a

preliminary decision but find that uncertainty holds you back from pulling the trigger. Some

decisions come with high-risk consequences, like the loss of a customer, loss of a substantial

amount of revenue, or even business closure. You may also find yourself faced with too many

viable alternatives or a decision that contains many factors to consider.

Considerations

Ethics sometimes plays a part in the decision-making process for a business owner. For

example, the owner may have to make a decision on whether to use a product that is potentially

harmful to the environment but necessary for the cost-effectiveness of the business. Santa Clara

University offers a process that you can follow in order to make an ethical decision as a business

owner. First, recognize that you're facing an ethical issue, obtain all of the facts about the

circumstances involved, evaluate all of your alternatives, make the decision, test your decision,

and then reflect on the outcome.

Expert Insight

Though not everyone will agree with your business decisions, it's important to enforce them as

the owner. It's smart to accept advice and opinions from other parties, but you are the final

word. Debbie Schachter suggests a consensus-building approach, which involves the other

parties but allows you to move forward with your final decision. Schacter says, "Remember,

consensus is not about everyone agreeing on one idea, but ensuring that the process to reach a

solution is universally understood to be valid."

Making decisions in a company or organization happens at all levels. A manager of a business

shouldn’t assume he’s right in every decision he has to make. In that regard, different types of

decision-making should be taken depending on the situation at hand.

Identifying Problems

Before making any decision, the organization has to identify exactly what the problem is. Not

identifying the problem could lead to an erroneous decision. The leader of an organization should

evaluate the issue with all employees so everyone knows about it, and then make a decision

that taps into what's worked before if that decision process is right for solving the issue. This

form of decision-making can be made into a computer program with a set pattern of rules to

follow in amending a problem.

Multiple Perspective Analysis

Sometimes using multiple perspective analysis to make a decision is best so a CEO or manager

can force herself out of her usual method of thinking. Professor Hossein Arsham, in an article

titled “Leadership Decision Making” at the University of Baltimore site, notes this method and its

steps. By wearing six different “hats,” you can make a decision using different thinking

approaches. For instance, a red hat uses reaction and emotion, or being aware of how other

people will react when the decision is made. A green hat will use freewheeling creativity in

making a decision. The article also notes that a decision can be made using differing points of

view from customers or those in different professions.

Short-Term Decisions

Another decision method is the short-term method, or operational decisions. These decisions

usually solve a problem in the immediate term through the action of employees. The method to

this involves practical steps for a quicker outcome. For example, it could be choosing a particular

delivery service to deliver products to the organization’s customers.

Following Up and Feedback

After an organization has made a decision, the manager or CEO needs to follow up on it to make

sure it was implemented correctly. Communication with every employee involved in

implementing the decision is important in this scenario. Additionally, a leader of an organization

should get feedback from those directly affected by the decision. By doing so, the organization

can know whether the decision was the right one. This helps in gauging how to make future

important business decisions.

Levels of decision making

Managers at all levels must make decisions on behalf of a company. The difference between

decisions at various levels lies in the scope of the choices made. Long-term decisions affecting

the company as a whole belong to the highest management levels, while decisions affecting day-

to-day operations fall to bottom management. All decisions relate directly or indirectly to

broader management functions: planning, organizing, leading, staffing and controlling. Different

management levels spend more time on certain functions than on others.

Board or Owner

All business and management activity follows from a company’s mission -- its reason for being in

business. A company’s board or owners create the mission and write a mission statement for the

internal and external audiences. Success in accomplishing the mission could take many forms.

The form chosen gives a company its vision, an ideal the business seeks to actualize. A caterer,

for instance, might envision becoming the first choice for jet-set soirees. Besides defining a lofty

ambition and the existential question of mission, a company’s board or owners also articulate a

company’s core values, those standards the business will never compromise.

Top Management

Top management must translate the vast scope of mission and vision into concrete

achievements over time. In other words, top management needs a strategic plan. Decisions

related to strategy involve companywide matters enacted over the long term. the goals are what

the company hopes to accomplish at least a year -- more often five years -- into the future.

Management then chooses a grand strategy, such as growth or diversification, to reach strategic

goals. Of all management levels, top managers spend the most time making decisions involving

plans. They also have decisional power over middle management.

Middle Management

Once top management decides the overall direction of the company, it’s up to middle

management to choose smaller tactical objectives that, put together, accomplish strategic goals.

Middle managers create tactical plans, which have more detail than strategic plans. The tactics

often are geared toward some function or department such as production, where a possible

objective could involve some measurable efficiency or quality improvement. Middle

management’s choices and plans see fruition in a year or less. Managers in this tier oversee

other middle managers or operational managers.

Operational Management

Also called first-line management, operational management is the level directly responsible for

employees. By choosing their own goals on a daily, weekly or monthly basis, first-line

management accomplishes the objectives of middle management. The scope of operational

management covers departments, sections or teams. Inventory, scheduling and budgeting are

examples of plans and decisions that operational managers adopt. Goals might include a certain

number of sales for the day.

3. Understand quantitative approaches to strategic decision

making

Quantitative approaches Quantitative analysis involves using scientific or mathematical data to understand a problem,

such as analyzing surveys to predict consumer demand. This contrasts with a qualitative

approach, which uses a more social methodology, like interviewing people. The quantitative

approach focuses on the results from a large number of people, instead of focusing on

individuals. Often a combination of the two approaches is used to solve a problem, taking

advantage of each approach's strengths.

Benefits of Going Quantitative

If you're looking for general information about the traits and habits of a large group of people,

quantitative research is the way to go. Quantitative methods involve compiling statistics, opinion

surveys and questionnaires, then examining the results to produce data-driven analysis. With

quantitative research, everyone from policy makers to marketers can determine the most

popular choices to make. The quantitative approach provides hard numbers, which are useful in

making business decisions and deciding between various projects.

The quantitative approach to gathering information focuses on describing a phenomenon across

a larger number of participants thereby providing the possibility of summarizing characteristics

across groups or relationships. This approach surveys a large number of individuals and applies

statistical techniques to recognize overall patterns in the relations of processes. Importantly, the

use of surveys can be done across groups. For example, the same survey can be used with a

group of mentors that is receiving training (often called the intervention or experimental groups)

and a group of mentors who does not receive such a training (a control group). It is then

possible to compare these two groups on outcomes of interest, and determine what influence

the training had. It is also relatively easy to survey people a number of times, thereby allowing

the conclusion that a certain features (like matching) influence specific outcomes (well-being or

achievement later in life).

Example from youth mentoring research:

Grossman and Rhodes (2002) examined duration of matched relationships in over 1,100 Big

Brothers Big Sisters mentor-mentee matches. Because the information they used was survey-

based and numerical, they were able to employ statistical techniques examining how duration of

match was related to different outcomes of interest.

In using a variety of statistical techniques, they concluded that “youth who were in [matched

mentoring] relationships that lasted a year or longer reported improvements in academic,

psychosocial, and behavioral outcomes” (p. 213). If Grossman and Rhodes had not used survey-

based quantitative research, they would not have had such a large sample of matches and

therefore could not generalize to matches in general. In addition, with a smaller number of

participants, it is challenging to apply some statistical techniques to examine emerging patterns

across such a large group of mentored matches. The current rule of thumb to using complex

statistical modeling is that you need a sample of at least 130 participants. However, for more

complex modeling that controls for characteristics, a larger pool of participants is needed.

Benefits of the quantitative approach:

Using survey methods across a large group of individuals enables generalization. For example, if

policy makers wanted to instantiate a policy about mentor training, they would likely require

some evidence that this training actually works. Interviewing a few individuals, or conducting a

focus group with forty matches, might be reflective of specific cases in which the mentoring

training worked, however, it would not provide strong evidence that such training is beneficial

overall. Stronger support for successful training would be evident if using quantitative methods.

Enables gathering information from a relatively large number of participant

Can conduct in a number of groups, allowing for comparison

Allows generalizing to broader population

Provides numerical or rating information

Informative for instantiating policy or guidelines

Lends to statistical techniques that allow determining relations between variables

Limitations:

Difficulty in recognizing new and untouched phenomena

Caution in interpretation without a control group

In summary, the qualitative and quantitative approaches to research allow a different

perspective of situations or phenomena. These two main approaches to research are highly

informative, especially if used in combination. Each approach has its benefits and detriments,

and being aware of the methods used to gather information can help practitioners and policy-

makers understand the extent to which research findings can be applied.

Game Theory

Game theory is "the study of mathematical models of conflict and cooperation between

intelligent rational decision-makers". Game theory is mainly used in economics, political science,

and psychology, as well as logic, computer science and biology. Originally, it addressed zero-sum

games, in which one person's gains result in losses for the other participants. Today, game

theory applies to a wide range of behavioral relations, and is now an umbrella term for the

science of logical decision making in humans, animals, and computers.

Modern game theory began with the idea regarding the existence of mixed-strategy equilibria in

two-person zero-sum games and its proof by John von Neumann. Von Neumann's original proof

used the Brouwer fixed-point theorem on continuous mappings into compact convex sets, which

became a standard method in game theory and mathematical economics. His paper was followed

by the 1944 book Theory of Games and Economic Behavior, co-written with Oskar Morgenstern,

which considered cooperative games of several players. The second edition of this book provided

an axiomatic theory of expected utility, which allowed mathematical statisticians and economists

to treat decision-making under uncertainty.

This theory was developed extensively in the 1950s by many scholars. Game theory was later

explicitly applied to biology in the 1970s, although similar developments go back at least as far

as the 1930s. Game theory has been widely recognized as an important tool in many fields. With

the Nobel Memorial Prize in Economic Sciences going to game theorist Jean Tirole in 2014,

eleven game-theorists have now won the economics Nobel Prize. John Maynard Smith was

awarded the Crafoord Prize for his application of game theory to biology.

BREAKING DOWN 'Game Theory'

Game theory creates a language and formal structure of analysis for making logical decisions in

competitive environments. The term “game” can be misleading. Even though game theory

applies to recreational games, the concept of “game” simply means any interactive situation in

which independent actors share more-or-less formal rules and consequences.

The formal application of game theory requires knowledge of the following details: the identity of

independent actors, their preferences, what they know, which strategic acts they are allowed to

make, and how each decision influences the outcome of the game. Depending on the model,

various other requirements or assumptions may be necessary. Finally, each independent actor is

assumed to be rational.

Game theory has a wide range of applications, including psychology, evolutionary biology, war,

politics, economics and business. Despite its many advances, game theory is still a young and

developing science.

Impact on Economics and Business

Game theory brought about a revolution in economics by addressing crucial problems in prior

mathematical economic models. For instance, neoclassical economics struggled to understand

entrepreneurial anticipation and couldn't handle imperfect competition. Game theory turned

attention away from steady-state equilibrium and toward market process.

In game theory, every decision-maker must anticipate the reaction of those affected by the

decision. In business, this means economic agents must anticipate the reactions of rivals,

employees, customers and investors.

An Example of Game Theory

Suppose executives in charge of Apple iOS and Google Android are deciding whether or not to

collude and exert duopolistic power over the market for smartphone operating software. Each

firm knows that if they work together and do not cheat each other, they will be able to restrict

output and raise prices, thereby enjoying above-normal profits.

A simple application of the prisoner’s dilemma shows Apple and Google cannot maintain a stable

equilibrium while colluding together, even under the unrealistic assumption that no other market

competitors exist or could exist. Consider the four possible scenarios:

1. Both Apple and Google sell the agreed-upon amount, do not cheat, and enjoy above-

normal profits.

2. Apple only sells the agreed-upon amount of operating software, but Google sells the

quantity at which it receives maximal net return (perhaps through secret rebates or setting up a

shadow subsidiary). Google realizes even greater profits by discretely offering goods at sub-

duopoly prices, and Apple loses market share.

3. Google doesn’t cheat, but Apple does. Apple realizes even greater profits by cheating,

and Google loses market share.

4. Both Apple and Google compete normally and realize normal profits. Whether or not

Google cheats, Apple is better off cheating, and vice versa. The same logic holds true whether

discussing individual brokers, advisors, salesmen or entire firms.

Performance evaluation review technique & CPM

Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) help

managers to plan the timing of projects involving sequential activities. PERT/CPM charts identify

the time required to complete the activities in a project, and the order of the steps. Each activity

is assigned an earliest and latest start time and end time. Activities with no slack time are said

to lie along the critical path–the path that must stay on time for the project to remain on

schedule.

Expected Completion Time

A strength of PERT/CPM charts is their ability to calculate exactly how long a project will take.

PERT/CPM provides managers with a range of time in which the project should be completed,

based on the total of all minimum and maximum time limits for all activities. This gives

companies a number of advantages, such as the ability to tell customers exactly when their

orders will be filled, or to know exactly when to order new supplies. The expected completion

time of the project is based on ideal situations, however, and does not take into account the

possibility of unforeseen events. The expected completion time of all subsequent activities and

the project as a whole can become skewed when things go wrong, which can cause problems if

the company has made plans that rely on the timely completion of the project. Another

weakness of PERT/CPM is that the technique relies on past data and experience to formulate

completion time predictions. New companies may not have any past experience to lean on,

putting them at a disadvantage.

Efficiency

Businesses can share PERT/CPM charts among all key employees, letting employees at each

station know exactly when they will be required to begin work processes, where the required

inputs will come from, where the outputs must go, and when their task must be completed. This

can help dispersed employees to operate efficiently by having a common understanding of the

expected work flow. When things go wrong, however, the very thing that encouraged efficiency

might suddenly cause confusion. When a project is held up due to an unforeseen circumstance,

workers at all subsequent stations must delay their own progress while explaining to subsequent

stations' employees why outputs are not flowing.

Critical Path

The critical path identified in a PERT/CPM chart shows managers which activities are the most

time-critical. This allows managers to focus process improvements on the tasks that are most

vital to the timely completion of the project. More slack time can be created by reducing the

processing time at critical points in the project, or the project schedule can be tightened up for a

quicker turnaround. Managers may place too much emphasis on activities along the critical path,

however. A weakness of CPM is that it focuses primarily on the time aspect of activities,

neglecting other concerns, such as quality and cost control. Focusing too much attention on the

critical path can cause managers not to notice possible production improvements in other

activities.

Limitations Data quality refers to the condition of a set of values of qualitative or quantitative variables.

There are many definitions of data quality but data is generally considered high quality if it is "fit

for [its] intended uses in operations, decision making and planning". Alternatively, data is

deemed of high quality if it correctly represents the real-world construct to which it refers.

Furthermore, apart from these definitions, as data volume increases, the question of

internal data consistency becomes significant, regardless of fitness for use for any particular

external purpose. People's views on data quality can often be in disagreement, even when

discussing the same set of data used for the same purpose. Data cleansing may be required in

order to ensure data quality.

This list is taken from the online book "Data Quality: High-impact Strategies". See also the

glossary of data quality terms.

Degree of excellence exhibited by the data in relation to the portrayal of the actual

scenario.

The state of completeness, validity, consistency, timeliness and accuracy that makes data

appropriate for a specific use.

The totality of features and characteristics of data that bears on its ability to satisfy a

given purpose; the sum of the degrees of excellence for factors related to data.

The processes and technologies involved in ensuring the conformance of data values to

business requirements and acceptance criteria.

Complete, standards based, consistent, accurate and time stamped.

If the ISO 9000:2015 definition of quality is applied, data quality can be defined as the degree to

which a set of characteristics of data fulfills requirements. Examples of characteristics are:

completeness, validity, accuracy, consistency, availability and timeliness. Requirements are

defined as the need or expectation that is stated, generally implied or obligatory.

Overview

There are a number of theoretical frameworks for understanding data quality. A systems-

theoretical approach influenced by American pragmatism expands the definition of data quality

to include information quality, and emphasizes the inclusiveness of the fundamental dimensions

of accuracy and precision on the basis of the theory of science (Ivanov, 1972). One framework,

dubbed "Zero Defect Data" (Hansen, 1991) adapts the principles of statistical process control to

data quality. Another framework seeks to integrate the product perspective (conformance to

specifications) and the service perspective (meeting consumers' expectations) (Kahn et al.

2002). Another framework is based in semiotics to evaluate the quality of the form, meaning

and use of the data (Price and Shanks, 2004). One highly theoretical approach analyzes

the ontological nature of information systems to define data quality rigorously (Wand and Wang,

1996).

A considerable amount of data quality research involves investigating and describing various

categories of desirable attributes (or dimensions) of data. These dimensions commonly

include accuracy, correctness, currency, completeness and relevance. Nearly 200 such terms

have been identified and there is little agreement in their nature (are these concepts, goals or

criteria?), their definitions or measures (Wang et al., 1993). Software engineers may recognize

this as a similar problem to "ilities".

MIT has a Total Data Quality Management program, led by Professor Richard Wang, which

produces a large number of publications and hosts a significant international conference in this

field (International Conference on Information Quality, ICIQ). This program grew out of the work

done by Hansen on the "Zero Defect Data" framework (Hansen, 1991).

In practice, data quality is a concern for professionals involved with a wide range of information

systems, ranging from data warehousing and business intelligence to customer relationship

management and supply chain management. One industry study estimated the total cost to the

U.S. economy of data quality problems at over U.S. $600 billion per annum (Eckerson, 2002).

Incorrect data – which includes invalid and outdated information – can originate from different

data sources – through data entry, or data migration and conversion projects.

In 2002, the USPS and PricewaterhouseCoopers released a report stating that 23.6 percent of all

U.S. mail sent is incorrectly addressed.

One reason contact data becomes stale very quickly in the average database – more than 45

million Americans change their address every year.

In fact, the problem is such a concern that companies are beginning to set up a data

governance team whose sole role in the corporation is to be responsible for data quality. In

some organizations, this data governance function has been established as part of a larger

Regulatory Compliance function - a recognition of the importance of Data/Information Quality to

organizations.

Problems with data quality don't only arise from incorrect data; inconsistent data is a problem as

well. Eliminating data shadow systems and centralizing data in a warehouse is one of the

initiatives a company can take to ensure data consistency.

Enterprises, scientists, and researchers are starting to participate within data curation

communities to improve the quality of their common data.

The market is going some way to providing data quality assurance. A number of vendors make

tools for analyzing and repairing poor quality data in situ," service providers can clean the data

on a contract basis and consultants can advise on fixing processes or systems to avoid data

quality problems in the first place. Most data quality tools offer a series of tools for improving

data, which may include some or all of the following:

1. Data profiling - initially assessing the data to understand its quality challenges

1. Data standardization - a business rules engine that ensures that data conforms to quality

rules

2. Geocoding - for name and address data. Corrects data to U.S. and Worldwide postal

standards

3. Matching or Linking - a way to compare data so that similar, but slightly different records

can be aligned. Matching may use "fuzzy logic" to find duplicates in the data. It often

recognizes that "Bob" and "Robert" may be the same individual. It might be able to

manage "householding", or finding links between spouses at the same address, for

example. Finally, it often can build a "best of breed" record, taking the best components

from multiple data sources and building a single super-record.

4. Monitoring - keeping track of data quality over time and reporting variations in the quality

of data. Software can also auto-correct the variations based on pre-defined business

rules.

5. Batch and Real time - Once the data is initially cleansed (batch), companies often want to

build the processes into enterprise applications to keep it clean.

There are several well-known authors and self-styled experts, with Larry English perhaps the

most popular guru. In addition, IQ International - the International Association for Information

and Data Quality was established in 2004 to provide a focal point for professionals and

researchers in this field.

ISO 8000 is an international standard for data quality.

Data quality assurance

Data quality assurance is the process of data profiling to discover inconsistencies and other

anomalies in the data, as well as performing data cleansing activities (e.g. removing outliers,

missing data interpolation) to improve the data quality.

These activities can be undertaken as part of data warehousing or as part of the database

administration of an existing piece of application software.

Data quality control

Data quality control is the process of controlling the usage of data with known quality

measurements for an application or a process. This process is usually done after a Data Quality

Assurance (QA) process, which consists of discovery of data inconsistency and correction.

Data QA processes provides following information to Data Quality Control (QC):

Severity of inconsistency

Incompleteness

Accuracy

Precision

Missing / Unknown

The Data QC process uses the information from the QA process to decide to use the data for

analysis or in an application or business process. For example, if a Data QC process finds that

the data contains too many errors or inconsistencies, then it prevents that data from being used

for its intended process which could cause disruption. For example, providing invalid

measurements from several sensors to the automatic pilot feature on an aircraft could cause it

to crash. Thus, establishing data QC process provides the protection of usage of data control and

establishes safe information usage.

Optimum use of data quality

Data Quality (DQ) is a niche area required for the integrity of the data management by covering

gaps of data issues. This is one of the key functions that aid data governance by monitoring data

to find exceptions undiscovered by current data management operations. Data Quality checks

may be defined at attribute level to have full control on its remediation steps.

DQ checks and business rules may easily overlap if an organization is not attentive of its DQ

scope. Business teams should understand the DQ scope thoroughly in order to avoid overlap.

Data quality checks are redundant if business logic covers the same functionality and fulfills

the same purpose as DQ. The DQ scope of an organization should be defined in DQ strategy and

well implemented. Some data quality checks may be translated into business rules after

repeated instances of exceptions in the past.

Below are a few areas of data flows that may need perennial DQ checks:

Completeness and precision DQ checks on all data may be performed at the point of entry for

each mandatory attribute from each source system. Few attribute values are created way after

the initial creation of the transaction; in such cases, administering these checks becomes tricky

and should be done immediately after the defined event of that attribute's source and the

transaction's other core attribute conditions are met.

All data having attributes referring to Reference Data in the organization may be validated

against the set of well-defined valid values of Reference Data to discover new or discrepant

values through the validity DQ check. Results may be used to update Reference

Data administered under Master Data Management (MDM).

All data sourced from a third party to organization's internal teams may undergo accuracy (DQ)

check against the third party data. These DQ check results are valuable when administered on

data that made multiple hops after the point of entry of that data but before that data becomes

authorized or stored for enterprise intelligence.

All data columns that refer to Master Data may be validated for its consistency check. A DQ

check administered on the data at the point of entry discovers new data for the MDM process,

but a DQ check administered after the point of entry discovers the failure (not exceptions) of

consistency.

As data transforms, multiple timestamps and the positions of that timestamps are captured and

may be compared against each other and its leeway to validate its value, decay, operational

significance against a defined SLA (service level agreement). This timeliness DQ check can be

utilized to decrease data value decay rate and optimize the policies of data movement timeline.

In an organization complex logic is usually segregated into simpler logic across multiple

processes. Reasonableness DQ checks on such complex logic yielding to a logical result within

a specific range of values or static interrelationships (aggregated business rules) may be

validated to discover complicated but crucial business processes and outliers of the data, its drift

from BAU (business as usual) expectations, and may provide possible exceptions eventually

resulting into data issues. This check may be a simple generic aggregation rule engulfed by large

chunk of data or it can be a complicated logic on a group of attributes of a transaction pertaining

to the core business of the organization. This DQ check requires high degree of business

knowledge and acumen. Discovery of reasonableness issues may aid for policy and strategy

changes by either business or data governance or both.

Conformity checks and integrity checks need not covered in all business needs, it’s strictly

under the database architecture's discretion.

There are many places in the data movement where DQ checks may not be required. For

instance, DQ check for completeness and precision on not–null columns is redundant for the

data sourced from database. Similarly, data should be validated for its accuracy with respect to

time when the data is stitched across disparate sources. However, that is a business rule and

should not be in the DQ scope.

Regretfully, from a software development perspective, DQ is often seen as a nonfunctional

requirement. And as such, key data quality checks/processes are not factored into the final

software solution. Within Healthcare, wearable technologies or Body Area Networks, generate

large volumes of data. The level of detail required to ensure data quality is extremely high and

is often underestimated. This is also true for the vast majority of mHealth apps, EHRs and other

health related software solutions. However, some open source tools exist that examine data

quality. The primary reason for this, stems from the extra cost involved is added a higher degree

of rigor within the software architecture.

4. Understand systems approaches to strategic decision

making

Systems approaches The success of your business in achieving its objectives depends on your management approach.

A systems approach can provide your management a unified focus with regard to the direction

towards which the business should strive. The approach requires your company to function as a

unit despite being a complex entity that's subject to changes from within and outside. It entails

analysis of problems -- identifying the forces affecting various system functions -- and designing

a synthesis of solutions to overcome the forces interfering with the achievement of the system’s

goals.

The Systems Approach

The systems approach to management is a concept that regards an organization as comprising

three purposively designed parts that are interconnected: input, process and output. The

particular components of these three parts will depend on the nature of your business. Inputs

will include raw materials, funds or technology. The process may refer to manufacturing and

quality assurance operations in an industrial setting, or activities related to management in the

service industry. Outputs will be the products or results of the undertaking. The systems

approach principle emphasizes the use of feedback response to aid in correcting or minimizing

errors when executing certain operations.

Importance

As an interdisciplinary approach that considers both the business and the technical needs of your

customers, the systems approach will ensure quality products that meet user requirements. This

is because the approach systematically integrates all functions into an interrelated team effort,

providing a structured framework for the development process that proceeds from concept to

production. This ensures that all the system functions are optimized to achieve maximum

compatibility for enhanced productivity. By leveraging feedback, such as assessment of work

done, identification of deviations, and corrective action, changes can be effected to better

accomplish the task.

Benefits

The systems approach to management introduces a structured configuration where personnel

work as a combined unit. The system is efficient; it provides an orderly plan of action with

personnel having clearly defined responsibilities that overlap and interlock to ensure that

absence of a member results in minimal loss of productivity. By improving workflow, it frees the

management of the routine details of operations management. Feedback provides a good basis

of control, leading to higher quality of products.

Overall, the approach improves strategic and management decision-making due to the

interrelationships between the various subsystems.

Limitations

A systems approach does not adequately specify the interdependence and nature of interaction

between an organization and its environment. The system tends to be rigid and will react slowly

in open systems that interact with external forces. It generally is suitable for the manufacturing

industry but not the service industry, which often has to adapt to the external environment. It

also does not offer practicing managers specific tools and techniques, remaining rather abstract

for practical problems.

Soft systems methodology

Soft systems methodology (SSM) is an approach to organizational process modeling

(business process modeling) and it can be used both for general problem solving and in the

management of change. It was developed in England by academics at the University of

Lancaster Systems Department through a ten-year action research program.

Overview

The methodology was developed from earlier systems engineering approaches, primarily

by Peter Checkland and colleagues such as Brian Wilson. The primary use of SSM is in the

analysis of complex situations where there are divergent views about the definition of the

problem. These situations are "soft problems" such as: How to improve health services delivery?

How to manage disaster planning? When should mentally disordered offenders be diverted from

custody? What to do about homelessness amongst young people?

In such situations even the actual problem to be addressed may not be easy to agree upon. To

intervene in such situations the soft systems approach uses the notion of a "system" as an

interrogative device that will enable debate amongst concerned parties. In its 'classic' form the

methodology consists of seven steps, with initial appreciation of the problem situation leading to

the modelling of several human activity systems that might be thought relevant to the problem

situation. By discussions and exploration of these, the decision makers will arrive at

accommodations (or, exceptionally, at consensus) over what kind of changes may be

systemically desirable and feasible in the situation. Later explanations of the ideas give a more

sophisticated view of this systemic method, and give more attention to locating the methodology

in respect to its philosophical underpinnings. It is the earlier classical view which is most widely

used in practice.

There are several hundred documented examples of the successful use of SSM in many different

fields, ranging from ecology, to business and military logistics. It has been adopted by many

organizations and incorporated into other approaches: in the 1990s for example it was the

recommended planning tool for the UK government's SSADM system development methodology.

The general applicability of the approach has led to some criticisms that it is functionalist, non-

emancipatory or supports the status quo and existing power structures; this is a claim that users

would deny, arguing that the methodology itself can be none of these, it is the user of the

methodology that may choose to employ it in such a way.

The methodology has been described in several books and many academic articles.

SSM remains the most widely used and practical application of systems thinking, and other

systems approaches such as critical systems thinking have incorporated many of its ideas.

The 7-stage description

7-stage representation of SSM:

1. Enter situation considered problematical

2. Express the problem situation

3. Formulate root definitions of relevant systems of purposeful activity

4. Build conceptual models of the systems named in the root definitions

5. Compare models with real world situations

6. Define possible changes which are both possible and feasible

7. Take action to improve the problem situation

CATWOE

In 1975, David Smyth, a researcher in Checkland's department, observed that SSM was most

successful when the Root Definition included certain elements. These elements, captured in the

mnemonic CATWOE, identified the people, processes and environment that contribute to a

situation, issue or problem that required analyzing.

This is used to prompt thinking about what the business is trying to achieve. Business

Perspectives help the Business Analyst to consider the impact of any proposed solution on the

people involved. There are six elements of CATWOE[2]

Customers - Who are the beneficiaries of the highest level business process and how does the

issue affect them?

Actors - Who is involved in the situation, who will be involved in implementing solutions and

what will impact their success?

Transformation Process - What is the transformation that lies at the heart of the system -

transforming grapes into wine, transforming unsold goods into sold goods, transforming a

societal need into a societal need met?

Weltanschauung (or Worldview) - What is the big picture and what are the wider impacts of the

issue?

Owner - Who owns the process or situation being investigated and what role will they play in the

solution?

Environmental Constraints - What are the constraints and limitations that will impact the solution

and its success?

Human activity system

A human activity system can be defined as 'notional system (i.e. not existing in any tangible

form) where human beings are undertaking some activities that achieve some purpose'

(Patching, 1990).

Strategic options development and analysis

Strategic Options Development and Analysis (SODA) is a method for working on complex

problems. It is an approach designed to help OR consultants help their clients with messy

problems.

SODA uses interview and cognitive mapping to capture individual views of an issue. Group maps

constructed through the aggregation of individual cognitive maps are used to facilitate

negotiation about value/goal systems, key strategic issues, and option portfolios. As well as

problem content, attention is paid to the affective, political, and process dynamics in the group.

SODA aims to provide a management team with a model as a device to aid negotiation, working

with individuality and subjectivity as the basis for problem definition and creativity. It tends to

generate increasingly rich models, rather than move towards abstraction or simplicity and sees

strategic management in terms of changing thinking and action rather than planning.

The method aims to develop high levels of ownership for a problem through the attention paid to

problem definition and negotiation. It is aimed at groups of four to ten participants.

The process uses two personal computers, special software (COPE, see below), one (preferably

two) large monitors, blank wall space, large sheets of paper, and water based pens. It is

managed by two facilitators - one who attends primarily to content and one to process. SODA

was originally developed by Colin Eden at the University of Bath.

COPE (now commercially available as Banxia "Decision Explorer")

COPE cognitive mapping software was created specifically for use with SODA. COPE is used to

map individual cognitive maps of the problem space and then to combine those individual maps

into a group map that can highlight both areas of consensus and areas of disagreement.

It is PC/Windows based, can use color, is easy to use and highly flexible.

Critical systems heuristics

Critical System Heuristics (CSH) provides a framework of questions about a program including

what is (and what ought to be) its purpose and its source of legitimacy and who are (and who

ought to be) its intended beneficiaries.

CSH, as developed by Werner Ulrich and later elaborated upon in collaboration with Martin

Reynolds, is an approach used to surface, elaborate, and critically consider boundary judgments,

that is, the ways in which people/groups decide what is relevant to the system of interest (any

situation of concern).

CSH is concerned not only with purposive evaluation, where the system or project has a

predefined goal and the focus lies in evaluating the means of reaching it, but also more broadly

with purposeful evaluation, where both the means and the ends become subjects of

inquiry. CSH rests on the foundations of systems thinking and practical philosophy, both of

which emphasize the 'infinite richness' of the real world. In this view, understandings of any

situation are inherently incomplete, and therefore based on the selective application of

knowledge. By systematically questioning the sources of motivation, control, expertise, and

legitimation in the system of interest, CSH allows users to make their boundary judgments

explicit and defensible. The immediate goal of a CSH evaluation is to elaborate multiple

perspectives on a given situation, but the broader aim is to share these perspectives and

thereby cut down on actors 'talking past' each other by promoting mutual understanding.

Bases and Background

Systems thinking is a broad field which employs 'systems' as conceptual tools which help to

acknowledge and deal with the complexity of the real world (see: Churchman, 1971;

Churchman, 1979). Evaluators are constantly confronted with overlapping networks of people,

technology, geography, institutions, funding, and ideology which generate complex realities

never entirely visible to any single person or from any single viewpoint. Each actor must develop

their stances and actions by interpreting the flows of information available to them. Because no

two people or viewpoints are exactly the same, this process will inevitably lead to a diversity of

conclusions regarding the most appropriate appraisals and the best pathways forwards. Rather

than focus on the stances and actions themselves, therefore, CSH zooms in on the process of

interpretation. Rather than asking 'what do you see in this situation?' as in most evaluation

approaches, CSH inquires more deeply, 'what are the underlying assumptions - values, power

structures, knowledge bases, and moral stances - which affect how this situation is perceived by

different concerned parties?'. Asking the twelve boundary questions (see: Table 1) fulfills

the analytic purpose of CSH, which is to reveal how decisions about what is relevant to this

interpretive process (boundary judgments) are being made.

The several strands of practical philosophy which underpin CSH emphasize (a) an orientation

towards practical (rather than theoretical) goals, and (b) the role of the researcher as an agent

of change, not simply a passive observer. Overlapping with the analytic purpose (of providing

more information), therefore, CSH also intends to generate discussion, reflection, and critique.

The boundary questions in Table 1 provide a common rubric designed to enable mutual

understanding and contructive dialogue. Engaging debate about the issues exposed during the

evaluation fulfills a practical purpose by opening up new ways to improve communication and

hence the overall wellbeing of those involved.

Finally, by intentionally setting all actors' perspectives on equal footing regardless of their

expertise or technical competence (sometimes referred to as a 'Socratic' professional

stance), CSH can have an emancipatory purpose, amplifying otherwise unheard voices.

Conversation and learning from an evaluation can be severely hindered by debates that stem

from differing boundary judgments and situational framings, but many approaches lack a means

of openly and explicitly discussing the underlying sources of these judgments. CSH opens

doorways to profound investigation of the different worldviews involved in a project.

Application

The CSH toolbox is composed of twelve 'boundary questions' designed to outline and provoke

thought about boundary judgments that determine situational framings.

Each question is considered in two modes: an ideal mode (what 'should' be), and a descriptive

mode (what 'is'), making twenty-four questions in total.

CSH is not a 'prescribed methodology' with step-by-step directions of standard best practices,

but instead a framework to encourage reflection. The technique of asking the boundary

questions, their order, wording, and the manner in which the answers to them are consolidated

will vary. Interested parties can refer to Reynolds (2007) for practitioner guidelines to

application based on experience (p. 6-8), and Ulrich and Reynolds (2010) for a 'standard

sequence' for beginners (p. 258-259), but the final form will remain eternally open to critique

and modification.

Decision making theories Whether consciously or unconsciously, management decision-making tends to follow a consistent

pattern of steps. Small business owners and managers make decisions on a daily basis,

addressing everything from day-to-day operational issues to long-range strategic planning. The

decision-making process of a manager can be broken down into six distinct steps. Although each

step can be examined at length, managers often run through all of the steps quickly when

making decisions. Understanding the process of managerial decision-making can improve your

decision-making effectiveness.

Identify Problems

The first step in the process is to recognize that there is a decision to be made. Decisions are not

made arbitrarily; they result from an attempt to address a specific problem, need or opportunity.

A supervisor in a retail shop may realize that he has too many employees on the floor compared

with the day's current sales volume, for example, requiring him to make a decision to keep costs

under control.

Seek Information

Managers seek out a range of information to clarify their options once they have identified an

issue that requires a decision. Managers may seek to determine potential causes of a problem,

the people and processes involved in the issue and any constraints placed on the decision-

making process.

Brainstorm Solutions

Having a more complete understanding of the issue at hand, manager’s move on to make a list

of potential solutions. This step can involve anything from a few seconds of thought to a few

months or more of formal collaborative planning, depending on the nature of the decision.

Choose an Alternative

Managers weigh the pros and cons of each potential solution, seek additional information if

needed and select the option they feel has the best chance of success at the least cost. Consider

seeking outside advice if you have gone through all the previous steps on your own; asking for a

second opinion can provide a new perspective on the problem and your potential solutions.

Implement the Plan

There is no time to second guess yourself when you put your decision into action. Once you have

committed to putting a specific solution in place, get all of your employees on board and put the

decision into action with conviction. That is not to say that a managerial decision cannot change

after it has been enacted; savvy managers put monitoring systems in place to evaluate the

outcomes of their decisions.

Evaluate Outcomes

Even the most experienced business owners can learn from their mistakes. Always monitor the

results of strategic decisions you make as a small business owner; be ready to adapt your plan

as necessary, or to switch to another potential solution if your chosen solution does not work out

the way you expected.

If you're the type of person who shies away from making an important decision in a timely

fashion, you'll have to resolve that issue before you start your small business. Decision-making

is an extremely significant element of successfully managing a company. Educate yourself on the

process of making effective management decisions for your company.

Significance

As the owner or manager of a small business, you are the point person for all major decisions

regarding the company. That includes hiring decisions, investments in advertising or promotions,

and decisions related to overall direction of the business. Managing your decision-making

process is also an important element of project management for you and your employees.

Techniques

You can approach the decision-making process from a number of perspectives. You can make

your decision after conducting a benefit versus cost analysis; if the benefits outweigh the cost

and that indicates the choice might be the right decision. You can also use a modeling technique

as another way to make your decisions, which allows you to make your final choice based on a

chart or visual model. For instance, flowcharts or decision trees are helpful tools for managers in

the decision-making process. Forecasting, the process of making future predictions about the

business or industry based on research and trends, can also help you make important business

decisions.

Types

You may face a number of specific dilemmas when making decisions for your business, as some

choices do not always have simple yes or no answers. For instance, you may have made a

preliminary decision but find that uncertainty holds you back from pulling the trigger. Some

decisions come with high-risk consequences, like the loss of a customer, loss of a substantial

amount of revenue, or even business closure. You may also find yourself faced with too many

viable alternatives or a decision that contains many factors to consider.

Considerations

Ethics sometimes plays a part in the decision-making process for a business owner. For

example, the owner may have to make a decision on whether to use a product that is potentially

harmful to the environment but necessary for the cost-effectiveness of the business. Santa Clara

University offers a process that you can follow in order to make an ethical decision as a business

owner. First, recognize that you're facing an ethical issue, obtain all of the facts about the

circumstances involved, evaluate all of your alternatives, make the decision, test your decision,

and then reflect on the outcome.

Expert Insight

Though not everyone will agree with your business decisions, it's important to enforce them as

the owner. It's smart to accept advice and opinions from other parties, but you are the final

word. Debbie Schachter suggests a consensus-building approach, which involves the other

parties but allows you to move forward with your final decision. Schacter says, "Remember,

consensus is not about everyone agreeing on one idea, but ensuring that the process to reach a

solution is universally understood to be valid."

Contingency theory

The basis of contingency theory in management is that there is no one best way to handle any

task or process. Whether organizing an entire company or planning a production work flow, the

best solution is influenced more by internal and external constraints than by a predetermined

method or management style.

Organizational Decisions

Contingency theory maintains there is no universal way to set up a business or company

successfully. The design of the corporate structure and culture must be in line with its various

environments: economic, social and physical. The subsystems of a business also influence

successful organizational planning. For example, an information technology business will have

different upper-management structure because of the need for a collaborative, cooperative work

force that may not thrive under traditional, hierarchical structures.

Leadership Decisions

Applying contingency theory to leadership, management style changes with different

organizational situations. A leader's behavior is dependent on three factors that define a

favorable leadership situation. Leader-member relations describe the dynamic with staff. Task

structure refers to how rigid work assignments are. Position power dictates how able a leader is

to exercise authority on a group. In a small business, this could mean an owner's style may

need to be fluid with even a single change to her staff.

Task Decisions

When applied to decision-making, the effectiveness of the decision in question depends on a

balance of how important the decision is, how complete the decision makers and the

subordinates' information is on the subject, and the likelihood of acceptance of the decision by

subordinates. Changing the nature of any one factor alters the relationship with the other two.

This may require the small business owner to share more information about an unpopular

decision to increase the chances her staff will accept the changes.

Other Constraints

Factors that alter balances in contingency theory relationships are widespread. Any influence on

a business or process may change the way a decision is made, or even the need for a decision at

all. Some common constraints include: The size of an organization, differences between senior

and operational management styles, socioeconomic conditions, government regulations,

technologies, attitudes between workers and managers, inherited corporate cultures. Your small

business will have its own unique constraints based on type of business, your community, staff

and the current economic climate in general.

Contingency Theory of Organization

Whether you are starting a new company or restructuring one you already own, building the

right organizational structure is important for your company's future success. There is no one-

size-fits-all structure, however. As a start-up, your company has an entrepreneurial style, but as

a mature company its structure will likely evolve into something else depending on the

contingencies you face.

Fiedler's Contingency Style of Leadership

Contingency leadership is a concept developed in the 1960s by Fred Fiedler. According to this

theory, leadership styles fall into two categories – task-oriented and relationship-oriented.

Leader effectiveness is contingent on three factors – leader-member relations, task structure

and position power. Leader-member relations is the level of trust and respect that employees

have for their leader. Task structure refers to the degree to which the work is formalized and

regimented. Position power is the level of authority a leader exercises. Fiedler believed that

leadership styles are fixed. Therefore, to organize effectively, a company should change the

leader to fit the tasks or change the work distribution to fit the leader.

Contingency Decision-Making

Decision-making, whether on a corporate level or departmental level, is subject to contingencies.

There is no formula a manager can use to arrive at an absolutely correct answer. Decisions

depend on the amount of information available. The importance of the decision is also a factor.

Contingency decision-making by a team leader is heavily influenced by the group he leads.

The relationship between leader and group will determine the likelihood that the group will

accept the decision. Any disagreement between group members only serves to add another

contingency factor. The extent of the variables demonstrates the fact that decisions are made on

a contingency basis.

From Groups to Organizations

The transition from group to organization is natural and straightforward. Following Fiedler, there

is no one best way to manage an organization. All organizations are different and operate

differently – even within the same industry. Moreover, different divisions within a single

company face different situations – or contingencies – and must vary their management styles

accordingly. Less-stable environments call for less-formal structures. On the other hand, more

formal structures work better in more stable environments.

Contingency Variables

Contingency management styles depend on the situations that an organization faces, and the

number of contingencies is substantially expanded from the Fiedler sample. Corporate-level

contingencies include factors such as technology, stakeholders – suppliers, customers, consumer

groups, for example – competitors, government regulations and unions. The size of the

organization is a factor, as the management style for a 10,000-employee company would be

very different for a 100-person company. Even the degree of uncertainty a firm faces can be a

contingency. All of these confirm there is no simplistic way to run an organization or lead a

department.

The Disadvantages of Mixing Decision Models

There are two main approaches to decision making in business. The rational approach based on

logic and analysis is favored by many business schools. In practice, most decisions are made

using an intuitive model. It is possible to combine the two approaches. However, you should be

aware of the disadvantages of mixing decision models.

Decision Models

A multitude of rational/logical decision models are available. All are based on a process of

gathering and analyzing information. The information is then used to inform a step-by-step

sequence of choosing alternatives to arrive at a decision. Intuitive decision making is understood

to involve the recognition of cues in a particular situation that allow an individual to recognize

patterns learned from experience. Pattern recognition enables a person to choose a workable

alternative even without logically working his way to a decision.

The Wrong Model

One disadvantage of mixing decision models is the risk of choosing the wrong model for making

a particular decision.

For example, military leaders rely heavily on rational/logical models for planning and executing

missions. Once the action starts, there may not be time to gather and analyze data in order to

make adjustments to planned strategy. Intuitive decision making based on experience under

time pressure is often the only alternative to making no decision at all. By contrast, if you make

a business decision to commit resources to a new project based on “gut feeling” and not on

analysis of projected costs and benefits, you are likely to make some very expensive mistakes.

Distortion

The mixing of decision models can lead you to allow one approach to influence and distort the

other. Harvard Business School points out that a leader used to making intuitive decisions can

unconsciously let her bias toward a given course of action affect evaluation of information and

critical choices when using a rational decision-making model. On the other hand, over-reliance

on rational analysis may lead to choosing conventional solutions and stifling potential insights

that are both intuitive and creative.

Considerations

Relying exclusively on either a rational/logical or an intuitive model means sacrificing the

advantages of the other. A rational approach offers the opportunity to develop optimal solutions

to problems, but tends to be time consuming. Intuitive choices can be made more quickly and

do not require the expenditure of resources to gather and analyze a large body of information.

Decision Making Confidence suggests choosing rational/logical analysis for decisions that will

have a large impact. When the potential negative impact of a decision is small, intuitive methods

may be more sensible and cost effective.

Limitations of decision making theories 1. Time Consuming

A lot of precious time is consumed for decision making. Individual decisions take a lot of time

because the manager has to study the merits and demerits of all the alternatives. He also has to

take advice from many people before making a decision. All this consumes a lot of time. Group

decisions are also time consuming. This is because it involves many meetings and each member

has to give his opinion. This results in delayed decisions or no decisions.

2. Compromised Decisions

In group decisions, there is a difference of opinion. This results in a compromised decision. A

compromised decision is made to please all the members. It may not be a correct and bold

decision. The quality of this decision is inferior. So it will not give good results on

implementation.

3. Subjective Decisions

Individual decisions are not objective. They are subjective. This is because the decisions depend

on the knowledge, education, experience, perception, beliefs, moral, attitude, etc., of the

manager. Subjective decisions are not good decisions.

4. Biased Decisions

Sometimes decisions are biased. That is, the manager makes decisions, which only benefit

himself and his group. These decisions have a bad effect on the workers, consumer or the

society.

5. Limited Analysis

Before making a decision the manager must analyse all the alternatives. He must study the

merit and demerits of each alternative. Then only he must select the best alternative. However,

most managers do not do this because they do not get an accurate date, and they have limited

time. Inexperienced researchers and wrong sampling also result in a limited analysis. This

limited analysis results in bad decisions.

6. Uncontrollable Environmental Factors

Environmental factors include political, social, technological and other factors. These factors are

dynamic in nature and keeps on changing every day. The manager has no control over

environmental factors. If these factors change in the wrong direction, his decisions will also

divert and go wrong.

7. Uncertain Future

Decisions are made for the future. However, the future is very uncertain. Therefore, it is very

difficult to take decisions for the future.

8. Responsibility is diluted

In an individual decision, only one manager is responsible for the decision. However, in a group

decision, all managers are responsible for the decision. That is, everybody's responsibility is

nobody's responsibility. So, the responsibility is diluted.