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Decision-Making in the Business World
Liberty University
Dr. Douglas Veatch
BMAL 501 Executive Leadership and Management
June 30, 2019
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Abstract
This paper aimed to dissect decision-making processes in business, significance of business
decision-making, stakeholder and stockholder models of decision-making, and techniques for
elevating the quality of business decisions. The decision-making process entails seven steps.
These are defining the business problem, establishing the goals of decision-making, identifying
resources, listing and evaluating all valid alternatives, making a decision, effecting the identified
decision, and evaluating the outcomes. The stockholder and stakeholder models are the two
clusters of decision-making in the corporate enterprise world. The stockholder model extensively
focuses on the wishes of a firm’s shareholders while the stakeholder approach infuses the
opinions of vital stakeholders. Decision-making is useful in facilitating the five functions of
management, identification of would-be pitfalls for a business, better utilization of resources,
motivating the staff members, enhancing business efficiency, and valuation of how managers
perform in a business. There are four ways to augment the quality of business decisions. These
are brainstorming, carefully deliberating on the likely outcomes of a decision, juxtaposing all
decisions with the organizational objectives, and focusing on rationality instead of intuition
during all decision-making processes.
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Decision-Making in the Business World
Business coaches typically emphasize the central role that decision-making plays in small
and established enterprises. The definitive outcome of any business decision strongly depends on
the quality of the decisions which stakeholders, shareholders, and managers make at any given
point. Staffing, marketing, production, sales, and customer relations decisions are among the
most important clusters of decisions which affect the operational efficiency of any outlet. While
some decisions are fairly easy to arrive at, significant decisions which have strategic effects on
business operations as well as the future sustainability of a business are relatively difficult to
arrive at due to the complexity of the issues in question. Unwanted consequences in business are
typically occasioned by poor or rushed decisions which fail to factor in the intricacies of business
operations in the backdrop of an ever-changing business environment in the contemporary
business world. This paper seeks to scrutinize decision-making processes in business,
significance of business decision-making, stakeholder and stockholder models of decision-
making, and techniques for elevating the quality of business decisions.
The Decision-Making Process
In a typical business, there are seven elemental steps for arriving at decisions. McMullen
(2015) categorized the first step as the problem-definition phase. Here, the authorized business
decision- makers are tasked with the responsibility of outlining and describing the problem in
question in a way which facilitates the process of dissecting the wide-ranging alternatives which
are available in solving the problem. Once a business problem has been demarcated accordingly,
the next step in the decision-making ladder is the establishment of goals. Establishing the goals
of making a business decision serves two purposes. At the core, is to minimize the odds of
deviating from the problem in question by narrowing down on the sub-problems which
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genuinely reflect the bigger picture of the problem in question (Audretsch, Kuratko, & Link,
2015). Secondly, is to enhance the process of evaluating the scale to which the decisions to be
made mirror desired outcomes.
The third step in the decision-making ladder pertains to resource identification; whereby,
the resources to be used in making a business decision are identified. As a rule, according to
Goss and Sadler‐Smith (2018), when business problems are seemingly complex, massive
financial resources are needed to carry out elaborate market research as well as to pay for
consultancy services. In that juncture, identifying the resources needed ensures that the
remaining phases of the decision-making process are carried out using the available resources.
Next, is to gauge the alternatives. In decision-making, an alternative is a solution that
addresses a problem and can be replaced by another solution in case the decision-maker deems
the alternative to be unsuitable (González-Cruz & Devece, 2018). Notably, before considering
the alternatives, the decision-maker has to come up with a list of possibilities which range from
the most untenable to the most justifiable. Afterward, the list of alternatives create the basis for
narrowing down by systematically considering each of the alternatives.
Next, is to make a decision. The elemental process of making a final decision demands
that the decision-maker intricately determines the best alternative from the available sets of
choices which solve the problem in question (Azadnia, Saman, & Wong, 2015). In a sole
proprietorship type of businesses, making a decision does not necessitate waiting for other
people’s decisions. However, when decisions are to be made by board members in an established
company, the step of making a decision necessitates a short voting process which eventually
determines the decision which the corporate business would adopt.
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Once the decision has been made, a layman’s understanding of the decision-making
process would firmly opine that the entire decision-making process is over. However, in the case
analysis, which Harrison, Mason, and Smith (2015) carried out, the researchers found out that
implementation and evaluation of a decision are the final steps in the decision-making ladder.
During the implementation step, the decision is put into action; whereby, the resources needed to
execute the decision are employed in accordance with the scope of the already defined problem.
Finally, the results of implementing the decision are weighed judiciously. The essential
aim of weighing the outcomes, according to Graham, Harvey, and Puri (2015), is to understand
the extent that the decision has successfully lived up to the expectations of the decision-makers.
This way, the decision could be altered appropriately during the implementation of step. By
extension, assessing the results of effecting a decision creates the foundation for arriving at more
informed decisions in the future.
The Stakeholder and Stockholder Models of Decision-Making in the Corporate World
The stockholder and stakeholder models are the two clusters of decision-making in the
corporate enterprise world. The stockholder model, according to Maine, Soh, and Dos Santos
(2015), is an approach to making decisions; whereby, an enterprise’s shareholders are the only
decision-makers. Given the monetary investments which stockholders might have invested in a
corporate business, the stockholder model accentuates that these investors are the best people to
make decisions as opposed to leaving the decision-making endeavors to the managers alone.
Notably, in case the managers are a part of a business’ shareholders, they are allowed to make
decisions in consultations with the remaining shareholders. However, when the managers are
employed by the shareholders, the stockholder model stresses that only the inconsequential
decisions should be left to these managers. In essence, in the stockholder model, shareholders
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have to vote in all the key strategic and tactical decisions revolving around sales, finances,
expanding a company, marketing, and appointment of high-ranking employees.
While the stockholder model extensively focuses on the wishes of a firm’s shareholders
alone, irrespective of the interests of the non-shareholders, the stakeholder model delves into the
broader picture of decision-making. More specifically, the stakeholder model puts emphasis on
opinions of vital stakeholders who have both indirect and direct vested interests in a company
(Hawkins, Forstmann, Wagenmakers, Ratcliff, & Brown, 2015). These include the surrounding
community, suppliers, staff members, and non-shareholding managers. Notably, the stakeholder
model does not neglect the interests of the stockholders. Instead, it obliges both the stakeholders
and stockholders to balance their disparate interests when making business decisions given that
businesses affect both the stockholders and the stakeholders. In Germany, for instance, many
corporate entities typically ensure that their boardrooms comprise of employee representatives
who, by extension, represent the interests of the surrounding community (Long, Xia, & Hu,
2017). This way, the stakeholder model makes it harder for self-interested stockholders to overly
prioritize their profitability motivations when making business decisions which affect employees
directly at any given time.
Importance of Decision-Making in the Enterprise World
Identification of Would-be Pitfalls for a Business
Decision-making acts as the basis for avoiding potential pitfalls which could certainly
bring a business to its knees. Importantly, according to Lehnert, Park, and Singh (2015), well-
deliberated decisions which are based on the knowledge extracted from previous mistakes is
helpful in empowering decision-makers to avoid future pitfalls. For instance, when business
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owners develop a culture of analyzing their past mistakes retrospectively before engaging in any
business practice, they are unlikely to commit the same mistakes; thereby, avoiding potential
drawbacks which could hinder business success. On the contrary, when a business owner lacks a
framework for decision-making, they are likely to repeat many of the mistakes which hinder the
overall operational efficiency of their enterprises.
Facilitating the Five Functions of Management
Again, in the corporate world, decision-making is essential in sustaining the five
functions of management. In the case analysis, which Janssen, van der Voort, and Wahyudi
(2017) carried out, the journal article substantiated that staffing, controlling, organizing,
directing, and planning can only be sustained when managers prioritize effective decision-
making. When innumerable alternatives exist when it comes to staffing, for instance, effective
decision-making makes certain that only employees who genuinely reflect a business’ overriding
goals are hired. Business executives who employ problem-solving approaches which facilitate
how they arrive at particular courses of action are unlikely to mismanage their business entities
even when decisions are seemingly difficult to make.
Better Utilization of Resources
Business resources are usually scarce even for the richest corporate entities. In that
juncture, decision-making in the business world acts as the backbone that protects an enterprise
from uneconomical usage of business resources. McMullen (2015) offered a sublime argument
which accentuated that making the right decisions enables a business entity to minimize the
likelihood of leakage of resources. In a typical business, resources such as money, information,
and machines are usually limited; hence, the wasteful utilization of these resources could
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inevitably jeopardize business progress. This is because improvident usage of business resources
raises the minimum cost of running a business besides progressively siphoning basic resources
from an enterprise.
Valuation of How Managers Perform in the Business
Decision-making is the most realistic basis for evaluating the performance of high-
ranking and lower ranking managers. Shepherd, Williams, and Patzelt (2015) categorically
argued out that the number of correct decisions which a manager makes encapsulates how well a
manager performs in their managerial role. This scholarly position strongly suggests that
managers who make incorrect decisions which result in unwelcome outcomes could justifiably
be deemed to be poor managers. In that case, the frequency of right and wrong decisions which
managers make could reasonably be used as important variables when evaluating the
performance of top-level and low-level managers. By extension, it is possible to gauge the future
organizational success of a business organization on the grounds of the performance of all
entrusted managers.
Motivating an Organization’s Staff Members
While customers play the leading role in determining an enterprise’s sales revenue and
employees are extremely vital when it comes to determining the sustainability of a business’
operational efficiency. In that note, inspiring all employees is an indispensable component of
effective management. Technically, decision-making is invaluable in employee motivation. In the
cross-sectional study, which Trianni, Cagno, and Farné (2016) carried out, the findings
demonstrated that workers are likely to enhance their productivity output when decision-makers
make decisions which genuinely reflect the overriding professional and personal interests of
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employees. For instance, when issues such as promotions, discipline, and benefits are based on
organizational frameworks which are made as a result of sound decisions, employees would
develop the impetus to work hard in their current roles by understanding that their efforts would
be appreciated. In contrast, when employee promotions, remuneration, and disciplinary issues in
a business are carried out haphazardly without any decision-making framework to guide such
issues, employee morale would be jeopardized progressively.
Enhanced Efficiency and Business Growth
The other importance of decision-making in the world of business related to the interplay
of business growth and enhanced business efficiency. According to Upson, Damaraju, Anderson,
and Barney (2017), decision-making brings about enhanced efficiency by determining the best
set of alternatives which are expected to improve a business organization’s productivity while
balancing issues pertaining to customer relations, high overhead costs, and the enterprise’s
external business environment. For example, in a business environment typified by economic
difficulties which reduce customers’ purchasing powers, decision-making enables business
executives to align their decisions to the extent that customers would be willing to make
purchases for each unit of a commodity. As a result, the decision-makers could opt to reduce the
market prices of their commodities to increase the quantity of sales made per unit. This way, the
business would develop its brand which, in turn, would gradually result in higher sales volumes.
In turn, when business executives manage to steer their business entities to high levels of
efficiency, business growth becomes the primary resultant effect of the efficiency.
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Techniques for Improving the Quality of Business Decisions
Brainstorming
The ever-changing business climate means that the business world is a unique sphere that
necessitates constant improvement of all business decisions. In simpler terms, inspiring business
decisions which lead to remarkable results might not necessarily have similar effects in future.
For that reason, varied business researchers have proposed particular techniques for augmenting
the quality of business decisions. Firstly, according to González-Cruz and Devece (2018), the
makers of strategic business decisions should brainstorm all complex decisions that practically
affect the short and long-term interests of their organizations. For example, while chief executive
officers are usually entrusted with making strategic decisions which do not necessarily require
the endorsement of board members, developing the culture of brainstorming ensures that these
high-ranking officers incorporate the best choices in their managerial roles (Audretsch, Kuratko,
& Link, 2015). Writing down as many helpful alternatives as possible is an important practice
that ensures that decision-makers do not overlook even the most microscopic details when
making decisions.
Upson, Damaraju, Anderson, and Barney (2017) extrapolated the issue of brainstorming
by stressing that the complexity of an imminent decision and the business problem at hand
determines the levels of brainstorming which business decision-makers have to carry out. For the
extremely complex business difficulties, the quality of decisions could be enriched by
brainstorming with seasoned external experts who understand the intricacies of balancing
business challenges in the context of alternatives which might be seemingly confusing. For
managers, brainstorming with selected workers could further elevate their chances of coming up
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with the right resolutions given the scale to which staff members’ experiences are relevant in
injecting a sense of practicality in some boardroom decisions.
Carefully Deliberating on the Likely Outcomes of a Decision
Having the end result in mind is the other mechanism for elevating the quality of business
decisions. In so far as it is impossible to foretell the impacts of business decisions with pinpoint
accuracy, considering the sets of probable outcomes is helpful in eliminating the options of
problem-solving which are expected to affect the business negatively (González-Cruz & Devece,
2018). Having a gist of the probable outcomes enables decision-makers to avoid second-guessing
how things will turn out during when the decisions are being implemented.
Juxtaposing all Decisions with the Organizational Objectives
Given that business entities have disparate goals, it is vital to make certain that each
decision reflects the case-specific goals of the business organization in question. According to
the argument which Trianni, Cagno, and Farné (2016) brought forward, the mismatch between
the decisions which managers make and the overarching goals of the business organizations
which they run, is the primary reason for the high numbers of business failures. While the
process of likening each business decision with an enterprise’s overriding goals might seem like
an obvious process of decision-making, Audretsch, Kuratko, and Link (2015) observed that most
decision-makers do not make extensive references to their business organization’s goals. Based
on that scholarly observation, decision-makers should make pertinent references to their business
entities’ objectives at all times.
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Focusing on Rationality Instead of Intuition
At an advanced level of analysis, intuition and rationality are the two ways of making
business decisions. On the one side, intuition, according to Trianni, Cagno, and Farné (2016),
entails using one’s sixth sense; in which, facts and situations on the ground are considered
irrelevant when making decisions. On the other side, according to Upson, Damaraju, Anderson,
and Barney (2017), rationality encompasses the utilization of facts, empirical data, and situations
on the ground to arrive at business decisions notwithstanding the personal perceptions, biases,
and feelings of managers and other decision-makers. By focusing on rationality as opposed to
intuition, decision-makers in business could avoid unnecessary drama in their businesses which
comes as a result of decision which are made using mere feelings which fail to reflect the
actuality of real-life problem solving in business.
Conclusion
This paper scrutinized decision-making processes in business, significance of business
decision-making, stakeholder and stockholder models of decision-making, and techniques for
elevating the quality of business decisions. Taking an investigative look into these aspects of
decision-making in the business world is helpful in enabling decision-makers to see the balanced
picture of business decision-making endeavors. While enterprises face a broad range of
difficulties, many of these challenges could primarily be attributed to the unwelcome impacts of
rushed and poor decisions. As described above, the techniques for elevating the quality of
business resolutions could help managers, stockholders, stakeholders, and other decision-makers
to reduce the undesirable consequences of decisions which fail to reflect the real case-specific
issues which affect a business.
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