Discussion post
POST 1
There are decision-making aspects that may be decentralized while others should be more centralized and maintained at higher levels. According to Fama & Jansen, (2017), there are basically four steps involved in decision making which include initiation, ratification, implementation, and monitoring. Decision control is a management function that sets quality standards, measures the actual performance, checks errors, and instigated corrective action in decision making. Of the four steps, decision management is made up of initiation and implementation with the rest of the steps also grouped together to constitute decision control. Decision management entails the aspects of design, building, and management of the automated decision-making systems used by an organization for managing supplier, customer, and employee interactions.
Most of large organizations often separate the functions of decision control with decision management through the use of hierarchies. This is particularly important for internal control purposes. In cases where risk bearing is a valuable and important aspect, it is wise to separate decision control from decision management. Large organizations with complex structures derive gains from separating decision control and decision management. In the organization where I work as the Human Resource Manager, I assume the role of decision control through overseeing control decisions and operational planning that involves control of labor through the hiring process and allocating the capital input that fits the quantity and quality of output that is desired (Harrison & Pelletier, 2020). Conversely, before my predecessor in my role at our organization split up decision control functions. Ratification functions was the function of the owners, or the board of directors while he (the HR manager) monitored the decisions to ensure they aligned with the organizations’ strategic plan.
POST 2
Decision management and decision control can and should be separated to maintain efficient and productive decision-making beneficial to the overall organization instead of a select group or individual employees. Four steps characterize the decision-making process: 1) initiation, 2) ratification, 3) implementation and 4) monitoring (Brickley et al., 2016). Decision management focuses on the initiation and implementation of decisions, whereas decision control focuses on ratifying and monitoring decisions (Brickley et al., 2016). In most cases, the hierarchy of an organization proves its separation of decision management and decision control as superior authority typically controls the managed decisions made by subordinates. When employees have decision management and control, they mustn’t utilize these rights over the same decision (Brickley et al., 2016).
An example of a firm where control resides with the same individual who manages the decisions is Bob’s Auto Company. The auto company owners allow their store managers to make pricing decisions without any ratification or monitoring of those decisions because they pay little attention to the company’s daily processes. In this case, the manager can price cars and auto parts at a discounted rate for family and friends. This concept negatively affects the owners of Bob’s Auto Company as they are constantly losing money and making less and less of a profit each time the manager makes pricing decisions to benefit himself instead of the company. Brickley et al. (2016) state, “whenever decision-makers are not owners, separating decision management and decision control limits conflict of interest.” Bob’s Auto Company proves this conflict of interest as it is in the manager’s best interest to keep his family and friends happy at a lower rate. It is in the owners’ best interest to continue to sell their products at the valued rate.
In comparison, an example of a firm where control is separated from the individuals who manage the decisions is Sally Furniture Store. Sally Furniture is a corporate-owned furniture store with a board of directors and a CEO. The CEO is responsible for the general decision management of all Sally Furniture stores while the board of directors ratifies and monitors all significant decisions. Brickley et al. (2016) teach us a fundamental principle when allocating decision rights, “if decision-makers do not bear the major wealth effects of their decisions, decision management, and decision control will be held by separate decision-makers.” Since the CEO of Sally Furniture Store is not directly financially affected by decisions, the board of directors will oversee the decision management to ensure the status of their owned stock percentage of Sally Furniture Store.
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