Approaches To Risk And Uncertainty In Decision Making Business Essay
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Published: Mon, 5 Dec 2016
According to Cole, Organizational Behaviour is the methodical study of individual behaviours within groups or teams, an investigation of the nature of groups and the implementation of change within group structures. He says the essence of organisational behaviour is to envisage, or say control, individual and team behaviours in a bid to achieve organizational goals. Organizational Behaviour has a broad concept and draws from several components such as Psychology, Philosophy, Sociology, Economics and Political science.
In an organization or a team, no two individual behave in the exact same way. The competence of organizations will be enhanced through a proper understanding of the individual nature of employees, their value and belief systems, and the importance they attach to work and their expectations from their organizations (CIPMN 2007).
This study aims to help us appreciate effective leadership behaviours, to understand how the structure and culture of an organization can affect its effectiveness, to outline the significance of learning and its relationship to organizational innovativeness and to assess how decisions are taken in an organization.
For the purpose of this paper, we shall understudy the introduction of Fanta Pineapple, a brand under the Nigerian Bottling Company, NBC. Coca-cola was established in 1886 in Atlanta, USA and operates in Nigeria under a franchise with Nigerian Bottling Company. With staff strength of about 6000 people, over 200,000 sales outlets, more than 80 warehouses and sales depot and 16 bottling plants churning out about 34 brands, NBC has the highest sold non-alcoholic beverage drinks in Nigeria today and is the largest manufacturer of soft drinks in West Africa.
APPROACHES TO ORGANISATIONAL DECISION MAKING
There are several approaches that an organization can take in making decisions. They include the Rational approach, Behavioural approach, Practical approach, Personal approach, Prescriptive and Descriptive approach and the Normative approach (Griffin & Moorhead, 2012). The approach that NBC used for this project is the Rational Approach. It involves identifying a problem or need, deriving alternatives, choosing one of the alternatives with the highest probable value, implementing the plan and choosing control measures. The outcome is compared to the outlined goal and if there is a disparity, a different alternative is chosen to solve the issue.
NBC began experience gradual reduction in sales for over a year. The research department identified the declining economic situation and gradual disappearance of the middle class, which led to a reduction in purchasing power of the citizens as the leading culprit for the low sales. Several solutions were proffered on how to rev up sales again. The solution that was agreed upon was put forward by the Brand building department. They proposed the introduction of a new product to be known as Fanta Pineapple. A team was then set up to actualize this proposal.
APPROACHES TO RISK AND UNCERTAINTY IN DECISION MAKING
Various methods have been developed to enable organizations cope with the risks and uncertainties associated with decision making. The rational comprehensive approach is one of them. It assumes that it is possible to have a solution to every unforeseen event that may unfold in an organization. The company management just needs to examine the cost and advantages and prepare for possible eventualities when making a decision.
The risk identified with the launch of the Fanta Pineapple brand includes the risk of not getting a flavour that will appeal to the market, either due to poor marketing drive or even an outright rejection of the new product by customers, in which case it would have cost NBC a lot of money to put the product together and get it to the market. NBC plans to mitigate this risk by sampling market opinion of how they would want the product to taste, bearing in mind that the bulk of the Nigerian populace is sugar conscious. They also decided on creating early market awareness by sensitizing prospective customers about the upcoming product using different forms of advertising.
Leadership is the process whereby an individual in a group harness the knowledge and expertise of other members and stimulates them to achieve the goal of the group (Cole, 1995).
Leadership theories are those theories that explain how a leader achieves the feat described above.
There are eight major theories. Some of them also have sub theories. They include (http://changingminds.org/disciplines/leadership/theories/leadership_theories.htm):
Trait theory assumes that certain people are born with inherent traits suited for leading others. It tends to look at leadership skills as a genetic factor.
Participative Theory assumes that it is the contributions of all the members of the team and their shared knowledge that makes a team succeed, not necessarily the actions of the leader.
Behavioural theory focuses on studying the behaviour of effective and successful leaders to know what they did and the behaviours they exhibited that made them succeed. The sub-theories here are the role theories (people defining roles for them selves and persuading others to act out that role) and Managerial grid (that leaders have varying levels of concerns for their team members and the project to be executed).
“Great man” theory of leadership assumes that leaders are born, not made and that great leaders will emerge when there is a great need.
Contingency theory assumes that different organizational challenges require different leadership styles and that a single individual is capable of mastering and exhibiting different leadership styles, if only matching the appropriate style to peculiar situations.
Transactional leadership theory assumes that team members are motivated by compensations and penalties. Its sub theory is the Leader- Member Exchange (LMX) theory that explains that leaders retain their position by agreeing on unstated exchanges with their members.
Transformational leadership theory assumes that people will always follow the person that inspires them and that vision, passion, enthusiasm and the right amount of energy will always yield results. Its sub theories include Burn’s and Bass’ transformational theories.
Situational leadership theory assumes that the best decision of a leader is dependent on a variety of factors. It has sub-theories like Vroom and Yetton’s normative model (assumes that participation increases acceptance, which in turn increases commitment) and Hersey and Blanchard (assumes that leadership style should be adapted to suit the followers’ level of commitment to the set task).
In a group, the personality of the leader must be at least related to the characteristics of the followers and the task for the team.
The leader of the project has adapted a blend of two leadership styles; the Situational leader- because this project was commissioned based on the position NBC finds itself as a result of dwindling economy and utmost participation is required from team members and Contingency leadership- because the project is seeking to grow NBC’s declining revenues.
IMPACT OF MANAGERIAL STYLES ON ORGANISATIONAL EFFECTIVENESS
A Leader may not necessarily be a manager and a manger may not necessarily be a leader. A leader who is also able to take on the characteristics of a manager that best complements his leadership style is poised to achieve more in his organization or team.
Below is a summary of some Managerial styles (Sunita, 2005):
Autocratic style: Used by a manger that is dedicated, but rigid. Single-handedly takes administrative decisions. Hardly requests for inputs nor accept the advice or contribution of others.
Democratic style: Used by a manger that encourages participation from team members and welcomes inputs and contributions. He tries to integrate team members and seeks the opinion of others before taking decisions.
Laissez Faire style: used by care-free managers. Battles with indecision and rarely takes real responsibility for the running of the organization.
Paternalistic style: used by managers who treat their teams as family. He protects shields and motivates team members like a parent or family head, thereby hindering team members from actually growing and developing themselves.
A manager that practices democratic/participatory style will accomplish greater team success.
From the interview with the members of the project team, it was discovered that the project leader practices democratic style of management, making it possible for all members of the team to contribute their quota towards the evolution of the Fanta pineapple.
MOTIVATIONAL THEORIES OF EMPLOYEES
Motivation theory is a concept that is designed to get the best out of employees and investigate the reason employees’ work in the first place.
According to Wilton (2011), the theories of Motivation can be broadly classified into Content theories and Process theories.
Content theories centres on factors that motivate people like financial rewards, promotion, recognition, class and job satisfaction. They focus on particular types of monetary and non-monetary motivators, directly or indirectly. It features theories like:
Abraham Maslow’s Hierarchy of Needs: he postulated that humans have 5 basic hierarchical needs; Basic or Physical needs (food, cloth and shelter), Security, Social belonging, Ego and Self-actualization. The pursuit to satisfy these needs, one after the other, is what motivates the individual to work.
FW Taylor’s study of Time and Motion: states that work planning, job fragmentation and appropriate training lead to optimum efficiency and delivery from employees.
Douglas McGregor’s Theory X and Y: Theory X encourages managers to be authoritarians because it says employees are lazy and would rather dodge work. Hence, they have to be closely monitored. Theory Y says that employees just need the precise conditions and they will excel, since they are self-motivated and ambitious.
Elton Mayo’s Hawthorne Effect: can be summarized as that employees value being part of a team more than money and good working conditions and managers should encourage team work.
Frederick Herzberg’s Two Factor Theory: says that employees derive increased satisfaction from motivational factors and dissatisfaction from hygiene factors.
Process theories centres on the process of motivation and inner decision-making mechanism by which an individual comes to a decision on the level of effort to apply under given conditions.
In reality, individuals have diverse needs and ambition. A major role of managers in an organization is to look at the needs of their employee and provide it as much as possible to keep employees engaged.
Maslow’s hierarchy of needs fits not only the members of Project Fanta Pineapple, but Nigerian employees in general. The nation is underdeveloped and there’s a lack of basic infrastructure. The government has not been able to provide these basic needs for the citizenry, so individuals have to provide it for themselves. NBC motivates project participants with incentives such as allowances and promotion on the job.
THEORIES RELATING TO WORK RELATIONSHIPS AND INTERACTION
Organizational behaviour in general and social psychology specifically is focused on the study of how individuals interact in groups and organizations. In organizations, teams and social gatherings generally, it is with interaction that we are able to communicate our inner thoughts, share experiences and exchange specific messages.
Several theories exist that have direct relevance to work relationships and interaction. It includes:
Behaviourism Theory: It is in the study of interactions we try to understand the concept of Norm. These are expected ways of behaving. They serve as guidelines and are flexible. Like in the case of hierarchical authorities in a team or an organization, it is the norm to follow the directions of the leader or manager.
Social constructivism: this theory began with the work of Berger and Luckman (1966, cited in Teater, 2010). They studied how individuals create knowledge, make meaning of the world around them and derive a realistic view of themselves. There are various other approaches that exist within the Social Constructivism theory like social constructionism, strict constructionism, feminist constructionism and critical constructionism. They all draw from various walks of life including psychology, sociology, philosophy and counselling.
Other theories are cognitive science and cognitive constructivism
It is expected that member of this Project Fanta Pineapple behave civilly, obey constituted authority even within the team, express their concerns and contribute innovative and creative ideas during meetings and brainstorming sessions.
CHARACTERISTICS OF ORGANIZATIONAL STRUCTURES
Organizational structure can be defined as the positioning of authority and distribution of expertise in the organization. It addresses the challenge of whether decision making should be centralized at the apex of an organization or decentralized throughout the organizational structure. This is a crucial decision as the way an organization is structured directly affects its efficiency and how it achieves it goals and objectives. It is however important to note that size is a major determinant of how organizations are structured. In small sized organizations, decisions are centralized but the process is more complex for larger organizations like NBC.
Organizations may take any of the following structures:
Unitary (U-form) structure: Found in medium sized organizations where the company is divided into departments like Marketing, Finance, Research and development and production. The departments are headed by managers that report directly to the Managing director. Each manager organizes the activities of his department, relays the organization’s corporate strategy to his members and overseas inter-departmental communication. It functions as a functional structure where hierarchical authority ends at a point.
R & D
Fig 1: U-form structure
The Holding (H-Form) Structure: this is used by organizations that have expanded their operations nationally or internationally. The holding organization is like a parent company that has controlling shares in other subsidiaries, but they don’t have control over the strategic decision making in those companies.
The Multi-divisional (M-Form) Structure: it is used by big organizations and this is the structure obtainable in NBC. The organization is divided according to their different functions they perform, or products or even target markets. The manager for each division is responsible for the day to day running and some short and medium-term decision making. This kind of structure is very effective as it eliminates long communication chains within each division and enables senior management concentrate on planning all-encompassing strategies. It may however become bureaucratic; there may be several levels before people at the lower part of the organization can reach people at the top. Organizations like NBC using thus form of structure try to consciously reduce bureaucracy to the barest minimum and in a way, mirroring the flat organization concept.
MARKETING & ADVERTISING
Fig 2: M-structure of NBC
There is a Hybrid of the above mentioned organizational structures known as the matrix structure.
The Matrix Structure: it supports horizontal flow of skill, expertise and information, across departmental boundaries. It is mostly utilized for big projects and product development, just like the Fanta-Pineapple Project. The members of this project team were selected from various departments to be part of this project, while retaining their respective job functions. While they report vertically to their departmental heads, they also report horizontally to their project manager. This structure is very flexible and teams can be set-up and disbanded whenever the aim of a particular project has been achieved.
ORGANISATIONAL CULTURE THEORY
Organizational culture is the value and behaviour of an organization that makes it unique. It is the sum of an organization’s knowledge pattern, behaviour, experience, assumption, philosophy and values that bind it together.
Organizational culture plays an important role in helping organizations achieve goals and objectives. It helps organizations to distinguish themselves and create a personality in the market place. It adds to the creation of a competitive edge for an organization. It helps large organizations to create a uniformity of processes, procedures and standards. It also helps to imbibe commitment and constancy from the employees, especially when such cultures are positive and unique. It promotes healthy intra-organizational competition, for example, if the organizational culture encourages high performance, then employees try to out-perform each other.
Some of the components of organizational structures are:
Language, Terminology and Acronym: it includes the language of expression, which is predominantly English in this part of the world; the style of communication- formal or informal, written or verbal; and the use of some keywords that would only make sense to employees of an organization.
Norms for behaviour: respect for authorities, relationship between employees and networking.
Prevalent leadership style in the organization.
Training and Development: both personal and career development.
Organizational values and work practices: customer-orientation, affinity for technological advancements and quality drive.
Creating a sense of belonging and unity of purpose.
As organizations are known and identified by their culture, they can take any of the following identities (Idowu, 2002):
Collaborative of Participatory culture: where the organization pays a great deal of attention to employees and customers and values their inputs to the running of the business. The leadership style here is situational and the organizational structure is mostly matrix form.
Control or Autocratic culture: where the organization persistently seeks to achieve excellence. Such organizations are like perfectionist and maintain high discipline and quality standards, even if to the detriment of employees. The leadership style here is autocratic and the organizational structure is usually u-form.
Cultivation culture: such organizations value creativity and innovation of employees. This is common in IT oriented businesses. Leadership style her is Charismatic and organizational structure is Flat form.
Competence culture: such organizations are achievement oriented, even if at the expense of organizational integrity. They seek to be market leaders at all cost.
ORGANISATIONAL CULTURE AND STRUCTURE IN NBC
The organizational structure in place in NBC is the m-form structure, which is what works best for organizations of this size. However, for the purpose of projects, the company usually implements the matrix structure.
The organization culture prevalent in NBC is the Collaborative Culture. They developed this culture through organizational efficiency. This culture reflects their values, which are commitment, teamwork, accountability, people, quality and integrity. The integration of these values within the organization’s processes made it possible for them to actualize production efficiency. NBC is as interested in their staff as they are interested in their customers. It is the customers that give NBC its income, but it is the employees that help the organization to even reach out to the customer in the first place. An attitude of excellence is maintained across the organization, which is why they are the leading soft drinks company in the whole of Africa, and have remained so for a long time. NBC motivate employees by providing conducive working conditions, good working tools and providing canteen facilities to encourage a unified break time so that employees use that avenue to socialize with each other. This encourages employees to perform at optimum and helps NBC achieve its corporate objectives. They also have periodic meetings with their key distributors and management team, where strategic communication occurs and they get feedback on their products and services.
CHANGE MANAGEMENT IN AN ORGANIZATION
Change refers to new and sometimes, unpredicted developments in the organization. It could be as a result of new legislation, merger or acquisition, organizational restructuring or introduction of a new product, like is the case with NBC. For change to have a positive impact on an organization, it must be planned. However, when it is unexpected, organizations need to take reactionary steps to absorb it. This can be achieved with the following:
Regular trainings for employees.
Seminars and meetings to communicate progress reports and get feedbacks.
Internal reforms: taking stock of processes, resources and job functions to see if they are being utilized effectively.
Drop less productive processes and resources and take on absolutely necessary ones.
Research and development: the above are short term adaptation. In the long run, the organization must itself become a change agent by embarking on research for improved processes and resources so that subsequently, they can take revolutionary actions, not adaptive reactions.
In the case of NBC, they managed this change by the:
Accepted there was a need for change to get a turnaround in their income.
Welcoming the change and creative ideas of how it should be executed.
Encouraged active involvement in the planning and implementation of the change.
Creating communication system whereby contributions were gotten from employees, irrespective of level and employee buy-in established.
IMPORTANCE OF LEARNING IN ORGANIZATIONS
Learning is a relatively permanent change in behaviour arising from observation and experience (Ejiogu, 2000). It is a way by which knowledge, skill and values are acquired. It is an important part of employee development. It can be used to learn new skills or mastery of old ones; it is reinforced when there is reoccurrence. Almost all behaviours are learnt. Knowledge and creativity are major differentiating factors for organizations.
The learning process can be influenced by learning aids, instructor, personal traits (like temperaments and IQ level) and learning conditions. In organizations, it can be executed by having a scheduled out-of-office training (theoretical) or on-the-job training (practical and enhances experience).
Employees get involved in the activities of the organization through learning, in order to achieve organizational goals and objectives. Organizations should strive for their employees to learn, not just to be trained.
Learning helps to correct any pre-conceived negative/false notions an employee may have about the organization. It enhances creativity and aids the employee fit into the organizational culture.
EFFECTIVENESS OF TEAM WORKING AND ORGANIZATIONAL DECISIONS
Teams are a formal group of people created for a specific project within an organization. They differ from groups, which is a collection of people that share the same characteristics, e.g., a name, but not necessarily the same purpose or mission. Teams have clear structures (there is always a leader), a purpose and guiding principles, are result-oriented and are bound by deadlines. In taking decisions, teams are able to share ideas, experiences and individual strengths, like a synergy. They are flexible, but have clear responsibilities and goals.
Dumaine (1994, cited in Dransfield) named 5 types of teams:
Problem solving teams
In every case, team members have to be selected on the basis of qualification and must be committed to the cause and have an interest in the subject matter. Every team member must have a role to play in the team. Team members also have to establish the most effective form of communication for every member and organize frequent meetings where their mission is measured against their achievements.
Once a team is established, they identify the challenge they are meant to solve and the key performance indicators to achieve this. Then they gather and analyze data from various sources, both internal and external to the organization and take action based on the information. They implement the solution and evaluate the outcome against the initial expectation.
The team that developed Fanta Pineapple is a Problem-Solving team. It was constituted to create a new brand that will impact on NBC’s sales positively. They had a lifespan of 9 months to achieve this, after which the team was disbanded. The team was a 10-member team, made up of representatives from 10 departments of NBC (see appendix) and each of them contributing their own wealth of experience towards the evolution of the new product. The new product eventually hit the market in July of 2011 and having just gone past it teething and acceptance phase is beginning to impact on total sales volume of NBC.
As a market leader and a high-performing organization, NBC needs to regularly make and take strategic decisions, effectively interpret them into actions and implement them before competitors do, whilst devoting the right amount of resources and effort to the process.
HOW ORGANIZATIONS FACILITATE INNOVATION AND CREATIVITY
To facilitate innovation and creativity generally, the management of NBC must give room for self development of employees. We will recall that part of NBC’s culture is to foster employee development, training and learning. In the case of this project, a new line had to be formed in the production department and so the staffs that were to handle this new line had to be trained on how to operate there, they were taught new “recipe mix” to arrive at the desired taste. Some of these trainings have to be repeated so that learning can occur and it becomes part of the employee. The process even entailed some employees going to Germany and USA for specialized trainings.
Team members stimulated each other with their individual contributions and idea sharing. Innovations for the product was thrown open to the entire employees through which they got some very relevant ideas. Team members are like informal networks within the organization and take back information to their departments.
The members of the Fanta Pineapple team were duly rewarded with bonuses, allowances and other incentives during the lifetime of the project.
This research was conducted as an action research the methods used for gathering information are:
Face to face interview: with the company’s representative on media and publicity. The hindrance to this method was that the representative was being cautious on divulging some vital information on this project that would have been instrumental to our work, for fear of certain information filtering to their major competitors, PEPSI, who may try to use it against NBC.
Data analysis was from company profile, past financial reports, feasibility study report and other companies that profiled NBC. NBC’s website it self does not have sufficient information as it should. Again, this is due to fear of competition gaining undue advantage through such means.
The Leadership Theory practiced in NBC is a blend of Participative leadership and Transformational leadership. The participative leadership is what makes NBC to involve the entire workforce as much as possible in decision making. It is also reflected in the Democratic managerial style. The transformational leadership is what motivates the workforce towards achievement, because the leaders are visionary, have passion for the company, inspire the workforce by example and inject the right amount of enthusiasm.
When compared to GUINESS NIG, the leading brewers of Stout in Africa, we see that they have the same kind of leadership and managerial theories as NBC. We can then say these styles are more effective for their industry.
Both NBC and GUINESS concern themselves with the basic needs of their employees as the Nigerian Government, as a developing nation, is yet to provide basic infrastructures for her citizens. Job security, a chance to put food on their tables, clothes on their backs, a roof over their heads and gain social acceptance are part of the motivation that keep employees of these organizations working. Theoretically, this can be related to Maslow’s hierarchy of needs Motivation Theory.
The organization culture prevalent in NBC is the Collaborative Culture. This culture reflects their values, which are commitment, teamwork, accountability, people, quality and integrity. It explains why they value their staff so much- employees as assets, they say. The culture is also customer-driven and upholds an attitude of excellence, which is why they are still the leading soft drinks company in the whole of Africa. NBC excellence culture ensures that tools are always in good working order and the work environment is healthy and safe. It also ensures the get feedback on their products and services from the various stakeholders. Again, GUINNESS shares similar cultures with NBC.
in this study, we said organizational behaviour is the study of the behaviour of individuals in relations with a group or team and that it draws from other disciplines like psychology, philosophy and sociology using Nigerian Bottling Company as a case study. We looked at the approaches to decision making, which are rational, behavioural, practical, personal, prescriptive & descriptive and normative approaches.
We briefly studied leadership theories and outlined them as trait, participative, behavioural, great-man, contingency, transactional leadership, transformational leadership and situational leadership theories. We also saw that managerial styles include autocratic, democratic, laissez faire and paternalistic styles. We looked various theories seeking to understand what motivates employees. The theories are Hierarchy of need, Study of time and motion, theory X and Y, Hawthorne effect and the two factor theory. Then we analyzed some expectations concerning work relationships and how people working in a team or group should interact with each other.
We studied characteristics of various organizational structures, including the u-form structure, m-form structure, h-form structure and the matrix structure. We saw some factors that help to define the culture of an organization, like the people, values, processes, their language and the style of leadership. We then related this to how it makes an organization able to handle changes, be it planned or unplanned changes. This led us to study the importance of learning in organizations and groups and the benefits of working in teams.
These studies were wrapped around the development of a new brand for NBC, Fanta Pineapple and ho
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