The Executive Decision Making Environment:
Data Resources for Executive Information:
a. Transaction Processing Data:
This data which is generated from TP5, usually reflect the past and current performance of the firm. Thus, this data is more useful for normal control purposes and have relatively little value in long range planning.
b. Internal Projection:
This data show the operating objectives for each functional area like expected revenue, budget and planned expenses and the overall financial plans for keeping the company to run smoothly.
c. External Data:
Although executives use internal data such as those supplied from TPS, and internal forecasts. But most of data they use in decision making, strategic planning, and handling fire fighting efforts, comes from external environment. It is only possible through environmental scanning and monitoring the competitive threats.
The type of decisions that executives must make are broad. Often, executives make these decisions based on a vision they have regarding what it will take to make their companies successful. Executives have a sense or vision of what is coming, and how to move their organizations in response to that vision. They are particularly skillful at generating new ideas and in providing ingenious solutions to problems. They also function best In crisis or situations of rapid change.
Risk Involved In Executive Decision Making:
Five main dimensions used in executive decision making are:
a. Lack Of Structure:
Many of the decision made by executives are relatively unstructured. For instance, what general directions should the company take? What type of advertising campaign will best promote the new product line? These type of decision are not as clear-cut as deciding how to debug a computer program or how to deal with an overdue account balance.
b. High Degree Of Uncertainty:
Executives work in a decision space that is often characterized by a lack of precedent, where results are not scientifically predictable from actions. For example, if prices are lowered, product demand will not automatically increase.
c. Future Orientation:
Strategic decisions are made in order to shape future events. As conditions change, organizations must change also. It is the executive's responsibility to make sure that the organization keeps pointed toward the future. Some key questions about the future include:
- How will future technologies affect what the company is
currently doing? .
- What will the competitor / government do next?
- What products will consumer demand five year from now? . Where will the economy move next?
- What will be the consumer's buying patterns?
d. Informal Sources:
Executives, apart from other types of managers, rely heaving on informal sources for key information. For example lunch with a colleague in other firm might reveal some important competitor strategies. Besides business meals and the media (TV, Radio, and News paper), some other important informal sources of information are meetings, tours chat with employee, brainstorming with a trusted colleague, and social events.
e. Low Level Of Detail:
Most important executive decisions are made by observing broad trends. This requires the executive to be more aware of the large overview than the tiny items. Even so, many executives insist that the answers to some questions can only be found by digging through details