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Flashcards · 7132 · Topic 2
Managers, leadership and decision making flashcards
33 cards on Topic 2, subtopics 3.2.1 to 3.2.3. Pick a subtopic or study them all.
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3.2.1 Understanding management, leadership and decision making
- The five activities in the role of managers
- Setting objectives, analysing, leading, making decisions, and reviewing (then feeding lessons into the next objectives).
- Autocratic vs paternalistic leadership
- Both decide alone. The autocratic manager communicates one way, downward. The paternalistic manager explains decisions and acts in what they see as staff's interest; staff may feel treated like children.
- Democratic vs laissez-faire leadership
- Democratic: the manager decides with staff input, or the group decides; two-way, but slower. Laissez-faire: staff decide within limits with little direction from the manager; risk of drift.
- Tannenbaum Schmidt continuum: what it shows
- A line, not boxes. At one end the manager uses authority and decides alone; at the other the team has freedom to decide within limits. As team freedom rises, the manager's use of authority falls. The right position depends on manager, team and situation.
- Tannenbaum Schmidt: name the positions at each end and in the middle
- Position 1: manager decides and announces. Position 2: decides and persuades ("sells"). Position 5: presents the problem, takes suggestions, then decides. Position 7: team acts freely within defined limits.
- Blake Mouton grid: the two axes
- Concern for production (the task) and concern for people, each scored 1 to 9 and written (production, people). The order matters: (9,1) is not (1,9).
- Blake Mouton: name positions (1,1), (9,1), (1,9), (5,5) and (9,9)
- (1,1) impoverished; (9,1) produce or perish; (1,9) country club; (5,5) middle of the road; (9,9) team management.
- Continuum vs grid
- The continuum asks who decides and how much freedom the team has. The grid asks how much the manager cares about the task and about people. A (9,9) manager can sit anywhere on the continuum, depending on the decision.
- Influences on management style: the task
- Urgency, risk, complexity, safety.
- Influences on management style: the people
- Skills, experience, motivation, size of the team.
- Influences on management style: the organisation and the situation
- Organisation: culture, size, structure, history. Situation: crisis, competition, labour market, time available.
- Why is "democratic is best" a weak evaluation?
- It ignores context. Effectiveness depends on staff skills, time available, risk and what the business is trying to achieve; an autocratic style can work well in a crisis or with new staff.
3.2.2 Understanding management decision making
- Scientific decision making vs intuition
- Scientific: choosing on data and analysis (decision trees, expected value, net gain); defensible but costs time and depends on inputs. Intuition: choosing on judgement and experience; quick and cheap, but biased and hard to justify.
- When does intuition suit a decision better than data?
- When the decision is urgent, small or unprecedented, data is limited, and the decision-maker is experienced. Big, costly, hard-to-reverse choices with data available favour a scientific approach.
- Risk vs uncertainty
- Risk can be given probabilities; uncertainty cannot. Trees deal with risk.
- Opportunity cost vs cost
- Cost is what you pay; opportunity cost is the best alternative you forgo. With net gains of £12,000, £9,000 and £7,000, choosing the first has an opportunity cost of £9,000, not £16,000.
- Decision tree symbols and rules
- Square = decision node (the business chooses). Circle = chance node (events decide). Probabilities from one chance node sum to 1. Build left to right; calculate right to left.
- Expected value and net gain
- Expected value (EV) = Σ(probability × payoff) for one option. Net gain = EV − cost of the option. Compare net gains; the highest is the numerical choice.
- Cost £20,000: 0.5 chance of £60,000, 0.5 chance of £10,000. EV and net gain?
- EV = 30,000 + 5,000 = £35,000. Net gain = 35,000 − 20,000 = £15,000. Worst case is a £10,000 loss, so the average hides a real downside.
- Average versus outcome
- A one-off decision gets one outcome, never the average.
- Limitations of decision trees
- Probabilities and payoffs are estimates; a small change in a probability can reverse the ranking; ignores timing of returns and non-financial factors; poor for uncertainty; data costs time to gather.
- The five influences on decision making in 3.2.2
- Mission, objectives, ethics, the external environment (including competition), and resource constraints.
- Evaluating a decision: the worst case
- Can the business survive it? A modest net gain with no chance of a big loss may beat a larger one with a heavy downside.
3.2.3 Understanding the role and importance of stakeholders
- Stakeholder
- An individual or group with an interest in a business, or affected by what it does. Shareholders are one stakeholder group.
- Internal vs external stakeholders
- Internal: owners, managers, employees. External: customers, suppliers, lenders, government, local community, pressure groups.
- Why consider stakeholder needs when making decisions?
- Support for the decision; mission and ethics; reputation and long-run performance; information from those affected. Against: time, cost, delay, and conflicting needs that cannot all be met.
- Stakeholder mapping: the two dimensions and four boxes
- Power and interest. High power, high interest: manage closely. High power, low interest: keep satisfied. Low power, high interest: keep informed. Low power, low interest: monitor.
- Power vs interest
- Power: the ability to influence the business or a decision. Interest: how much a group is affected by, or cares about, the outcome. A group can have either without the other.
- Overlap vs conflict of stakeholder needs
- Overlap: one decision benefits several groups (a successful launch gives profit and secure jobs). Conflict: helping one group reduces another's outcome (a price cut helps customers but squeezes shareholders and suppliers).
- Communication vs consultation
- Communication: passing on information, mostly one-way (newsletter, press release); fast and cheap. Consultation: seeking views before deciding, two-way (meetings, surveys, staff representatives); better decisions and less resistance, but slower.
- Influences on the relationship with stakeholders
- Power and dependence; business size and market position; leadership style and culture; mission and ethics; history and trust; competition; media and social media; the scale of the decision.
- Profit £150,000, 30% paid as dividend. Suppliers win an extra £30,000 a year. Effect on the dividend?
- Profit falls to £120,000; the dividend falls from £45,000 to £36,000, down £9,000 (20%). The other £21,000 comes out of retained profit.
- Ways to resolve stakeholder conflict
- Compromise, delay, an alternative option, or an explained priority. The choice depends on mission, objectives, each group's power, the size of the decision and long-run effects.