Decisions are the options made from two or more alternatives. McShane and Von Glinow (2010) defined that “Decision making is a process of making choices among one or more alternatives with the intention of moving toward some desired state of affairs”. Effective decision making involves identifying, selecting and applying the best alternatives. People need to use all available resources to predict the outcome of each option and based on the outcome to choose the best alternatives for the particular situation.
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In the real world, people usually do not follow the rational model to make decision because there are many undefined problem and ambiguous alternatives. For example, people usually simply find an acceptable solution to solve the problem rather than find the most suitable one. Hence, some decision makers probably make decision based on bounded rationality, emotion and intuition. Framing and heuristics are the judgments shortcuts that people used to simplify the decisions. Anchoring and adjustment, availability and representative are the three types of heuristics.
People can make choices more effectively by systematically assessing alternatives. Scenario planning is a method that used to forecast possible future. Scenario planning can helps to make the best future decisions before they occur. Furthermore, people can evaluate decisions in an effective way such as find systematic sources, establish a present level to abandon the project, minimize escalation of commitment and involve several people in the decision evaluation process.
In addition, some leaders or company also involve their employees in decision making. Leaders and company have limited ideas or knowledge to make the best decision. Thus, they need to rely on employees to solve the problem in a more effective way as employees may have more innovative and multiple alternatives. Improvements on decision quality, defining problem more quickly, better solutions generated are the benefits of employee involvement.
McShane and Von Glinow (2010) defined that “Creativity is the development of original ideas that make a socially recognized contribution”. Creativity also is the process of creating unique ideas or products that are useful to the organizations. Creativity allows and encourages people to think out of the box, which produce innovative and unique ideas for a particular task.
Preparation, incubation, insight and verification are the phases of the creative process. Preparation means studying the information and skills that related to the problem. Incubation assists divergent thinking which means reframing the problem in a distinctive way and creates different approaches to the problem. Insight refers to the ideas in a vague form. The idea is worked into a realistic form in the verification phases.
Organizational factors such as freedom, resources, learning orientation, organizational support and more will affect the creativity ideas. It is also means that a comfortable and supportive work environment will helps the employees to improve and produce creative and unique ideas. Besides, redefine problem, associative play and cross pollination are the activities that use to encourage creativity.
Lastly, creativity in decision making can be said that looking for the novel and unique ideas which the elements in the ideas are previously unseen.
Background of NIKE, Inc.
NIKE, Inc. is the world leader in athletic apparel, footwear, equipment and accessories. “To bring inspiration and innovation to every athlete in the world” is the mission of Nike. Converse, Inc., Nike Golf, Hurley International, LLC and Cole Haan are Nike’s wholly owned subsidiaries. (NIKE, Inc., 2011)
Bill Bowerman and Phil Knight have met each other in 1957. In 1962, both of them have become partner and form Blue Ribbon Sports. They pledged $1000 and place order of 300 pairs of shoes in 1964. The first Blue Ribbon Sports retail store opened in Santa Monica, California in 1966. Bowerman and Knight have design and manufacture their own brands of athletic shoes. In 1972, the new Nike line of footwear was introduced and Field Trials were held in Eugene, Oregon.
Blue Ribbon Sports was later changed to NIKE, Inc. in 1978. Nike Air Technology in Tailwind running shoes was born in 1979. In 1980, Nike becomes a publicly traded company. Nike had lost their position as industry leader in the middle of 1980. In 1987, Nike designed to regain the industry leader by using marketing and advertising campaign and differentiate Nike from its competitors. Nike build reputation by create inspiring ads with “Just Do It” as slogan in 1988.
In 1990 to 1999, Nike had signed several individual players and national teams around the world and began to design footwear and apparel for golf and soccer. Now, Nike has continued to expand its business to China and become the official sponsor of the National Football League (NFL).
Decision making is a process of selecting from one or more alternatives with the purpose of moving toward some desired state of affairs. Moreover, decision making is a process that decision maker need to make choice from the available option or alternatives in order to achieve the organization goal or to arrive at a solution for a given problem.
Decision plays an important role in the organization. If the decision maker does the wrong decision, it will influence the company productivity and profit. Therefore, the decision maker needs to do the rational choice decision. And decision maker can follow the rational choice decision process and do the right decision. First step is identifying the problem or opportunity. Decision maker needs to identify the problem or opportunity before do any decision. Problem is the gap between what is and what have to be. For example, there is a labor practices’ problem occurred in Nike as stated in Nike first Corporate Responsibility Report, after Nike identify and evaluate its problem and then they came up with ways to resolve the problem. Nike decided to increase training for both managers and employees in order to improve the productivity, reduce labor turnover and less sick leave. The decision made involved all level of the organization where the top management make the decision and the subordinates need to collaborate to achieve the company’s goal.
However the possible disadvantage of Nike to increase training for their current employees is that it can become very stressful to their employee. When an employee is stressed, their job performance goes down. Over-training in the workplace can be a waste of valuable resources such as training materials, hire or promote individuals to train their employees, and also need to pay for both the trainers and the trainees. During the extensive training sessions, employees may become bored and lose interest in what they are learning. Once an employee loses interest, much of the information being taught will not be retained and this will waste the employee time (Robertson).
According to NIKE, Inc. (2011), Poor conceived overtime and sick leave policies can reduce employees work performance. If Nike does not regulate contracted overseas factories with overtime levels that are both required by local labor and health authorities, it can attract complaints from human rights organization as well as causing undue health problems to employees which can affect their work performance (Answers.com, 2012).
Sick leave is a form of employment benefit in the form of paid time off for illness. However, Nike intends to increase productivity by initiating an ‘Attendance incentives’ policy which encourage employees to attend for work but this may send the wrong message to the employees that attending to work even while they are sick would earn them credits. This can cause an employee to feel pressured to if they want to take sick leave even when they are seriously ill, which could result in significant health damage and increased health care costs for the company (Smith, 2013).
Second step is choosing the best decision process. Decision process include programmed and non-programmed. Programmed is a decision that made in routine, repetitive, frequent decision and highly structured environment. In this decision making, they allow to set up a rule, policies and procedure to follow. In this decision making, they can follow standard operating procedures because of the highly structured environment. For example, to improve daily productivity, Nike has implemented lean manufacturing which is the foundation of how Nike enhances sustainable manufacturing. Lean manufacturing is a system and continuous enhancement that target to deliver the highest quality product while reducing waste. Lean manufacturing can empower workers and teams. A significant increase in satisfaction of workers in factories is found after lean manufacturing is implemented.
The problem facing by Nike when implemented lean manufacturing is hard to get support from their employees to follow and take orders. This can sometimes be difficult to attain as some employees who is resistive to changes. Lean manufacturing system requires a complete overhaul of manufacturing systems that may cause personality clashes, stress and refusal by employees who prefer old ways of doing things especially the older employees. Thus, it possibly will cause conflict among others in the work group. Lean manufacturing training is a constant ongoing process, and when first starting out it will takes a lot of time and effort on everyone’s part (Manufacturing Info, 2010).
The time investment required to implement lean manufacturing system throughout Nike is one of the drawback. Successful implementation requires the participation and support from employees throughout the company to guarantee that the cells integrate well with one another (Deiterich, 2013). Due to lean manufacturing system are dependent on supplier efficiency, any interruption in the supply chain on production can be a problem that negatively affects customers. Delays in delivery can cause long-lasting marketing problems that hard to overcome and may cause problem of customer dissatisfaction (Wood, 2013).
On the other hand, non-programmed decision is unique decision that requires a custom made solution. In this decision making, they mostly deal with unstructured environment and incomplete information. This decision making cannot set up a rule, policies and procedure to follow because this decision making is infrequent decision and unstructured environment. To solve the non-programmed situation, Nike have spent more than 15 years to deal with the contract factories on the issues of worker rights and protections, wages, living conditions for workers and the environmental impacts of manufacturing processes. Nike is setting high expectations for workers, providing training and tools to help factories to meet those expectations and accessing their performance. This approach able to create baseline standards, improved oversight and helped factories to move beyond compliance.
In this case, certain issues continue to arise. Issues such as overtime, working hours and associated wages have made up the majority of violations found by audits of apparel, footwear and equipment factories. Nike spends a lot of time and resources to deal with these types of issues in the factories that are poor performing, while having less time to engage with the factories that are high performance. Therefore, Nike have evolved their approach to build relationships with contract factories and developed a new manufacturing vision (NIKE, Inc., 2011).
Third step is developed and identify alternatives. After identify the problem or opportunity, they need to do the research. For example, they need to find the solution that can solve the problem they have already identified. After this step, they need to choose the best alternative among one or more alternatives. Next step is implement choice. They can implement the choice in the problem or opportunity. Evaluate choice is the last step, which they need to evaluate the choice or the decision outcomes. For example, whether the gap has narrowed or not or whether the problem have solved or not. Nike is doing well in identifying alternatives. To support the lean manufacturing system, Nike has provided resources to contract factories to support their transition such as training, coaching and technical assistance. This shows that Nike not only depends on the formal procedure like lean manufacturing but also finding other alternatives to improve the productivity.
Although the contracted factory (owner and top level management personnel of factory) are being supported by Nike (monetary and other expertise resource), however, operational workers may not receive the fair amount of support from Nike and operational employees are sometimes not recognized as a valuable part of the business value chain. Some workers are unfairly compensated in return for their work and this can lead to a low self-esteem, lack of morale and reduced in productivity (Wilsey & Lichtig).
Problem identification challenges include perceptual defense, stakeholder framing, decisive leadership, mental models and solution-focused problems. Perceptual defense is ignoring information that threatens their self- concept. Stakeholder framing is stakeholder try to persuade decision maker that interest to problem or opportunity not important. Decisive leadership is decision maker do the decision making without enough analyzing the data. Mental model is an assumption and expectation that prevent people seeing unique problem or opportunity. Solution- focused problem is straight to the solution rather than do the investigation, analysis or identify the problem.
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Creativity is developing an original idea that makes a socially recognized contribution. Creativity in decision making can help the company solve the problem and get the new and useful alternatives. Creative work environment can motivating the work, encourage experimentation, tolerate mistakes, open communication and sufficient resources. Creative process model include four steps. First is preparation. They need to know the problem and do the preparation such as find the information or do the research or learn some skills that help in creative. Next is incubation. They put the problem aside but mind still working on the background. Third is insight. Suddenly they become aware of unique idea. They see or hear something and cause them suddenly to have a new idea. Last is verification. In this step, they need to evaluate their idea is good or not or benefit or costly for the company.
Nike is playing well in creativity either in the shoes design or advertising. The shoes designer need to design the shoes to do three visual dialogues that are attract consumers with iconic design, clean and simple, engage them with craft that is holistic and catch them with the idea. The idea of barefoot shoes that designed by Nike is impressively creative. Nike concerns on the structure of the foot. They did pressure testing on the high-end athletes about what they are doing to make themselves better and also discover that they are usually training barefoot. That is the idea of barefoot shoes came from. Nevertheless, Nike also come out with interesting advertisement and won the Creativity Best 2012 as both the television and print categories is one of the year’s most innovative advertisers.
Employee involvement is the degree to which employee influence how their work is organized and carried out. Different levels have different forms of involvement. In the lowest level, they do not know what problem is about in the company so they do not make the recommendation. In the middle level, they know what problem is happen in the company and they will provide the recommendation to do the decision making. In the highest level, they make the entire decision making process. They need to choose the best alternative among one or more alternatives and implement the choice and evaluate the choice. Higher employee involvement is better when the employees have relevant knowledge beyond leader and can help the leader solve the problem. Most employees would lack commitment if they do not involve. Company need encourage their employee involve in the situation because higher employee involvement means higher commitment of employee. Nike involved all levels of the organization in decision making. For instance, top managers determine their organization’s goals, what products and services to provide. And middle and lower managers determine the production schedules, select new employees and other routine practices.
The disadvantages of moderated employee involvement within an organization’s decision making process are too many lines of communication and the potential for inconsistent decision making. When more employees have decision making ability, more communication is needed to make certain that decisions are consistent across the organization. This consistency is significantly important to brand recognition and consistency. Managers may need a long time to monitor decisions and activities with employee involvement to protect against negative consequences and to control the potential for chaos (Kokemuller).
The rational choice paradigm can make several assumptions about the human capacity to process information. One of assumptions which are decision makers can process information about all alternatives and their consequence but normally this is not possible to happen in reality. They only evaluate a few alternatives and some of the main outcomes of those alternatives as well as the Nike. There are some recommendations on how those assumptions that being used by Nike can be applied more effectively in the coming future.
Postdecisional justification gives people an excessively optimistic evaluation of their decisions but in reality it will bring the objective feedback to the company. There are four main reasons which are self-justification, prospect theory effect, perceptual blinders and closing costs explained that why people poorly evaluated their decision outcomes. These reasons make escalation of commitment look irrational.
The first recommendation for Nike is to minimize postdecisional justification and escalation of commitment. This will ensure that the people who made the original decision and people who later evaluate that decision are different. The self-justification effect can be minimized by this separation of roles due to the person responsible for evaluating the decision is not connected to the original decision.
In addition, the Nike can publicly establish a preset level at which the decision is abandoned or reevaluated. It is similar to a stop-loss order in the stock market, whereby the stock is sold if it falls below a certain price. The problem with this solution is that the situations are always so complex. This is because it is very difficult to identify an appropriate point to abandon a project.
The next suggestion for Nike is to looking for a source of systematic and clear feedback. For an example, the phenomenally large cost overruns at Scotland’s new parliament building might have been smaller if let say the Scottish government had received less ambiguous or less distorted information from civil servants about the true cost of the project during the first few years. The escalation of commitment happened in Scotland because of they do not see the problems soon enough.
Lastly, the Nike can try to improve their decision evaluation process by involving of more people in their own evaluation. Besides that, co-workers of Nike can continuously monitor each other and they might notice the problems sooner than someone working alone on the project. Employee involvement offers these and other benefits to the decision making process. So that, Nike can identify their problems, choose the best alternative and implement their decision with the knowledge and multiple perspectives of employees of company.
Other than that, we recommend Nike to use Theory Y by Douglas McGregor (1960) to help their employees’ improve their working performance and distress due to over training. Theory Y emphasize on participative management style. This theory assumes that employees’ effort in work is as natural as play and work. They are self-motivated, enjoy their work a lot, self-direction and always seek for responsibility. Nike should motivate their potential employees and helps them to develop their skills and capacities. Appraisal method such as provide promotion opportunities to employees with good performance. Motivated employees are more willing to help organizations to achieve goals.
According to Comm’s study (Puvanasvaran, A. P.), there are five best practiced components can be used to solve the problem of lean manufacturing which are environment change, leadership, culture, employee empowerment and communication. Nike should help the older employees to understand how lean manufacturing system work, try to communicate and share clear information with them so that they can understand their company goal. Nike can assign some employees to guide those employees who are not familiar with the process.
Moreover, we also recommend Nike applies values drive behavior to motivate and handle the problem of operational workers who did not get their return fairly. The component of justice and fair guidance are needed. Nike managerial leaders should practice ethical behavior by locating organization resources fairly. Resources such as people, capital assets, money should treated and distribute fairly. They treat the workers equally by giving them the amount they deserved to get. Another component is love and kindness. Workers should be treated kindly. When their effort on the job is recognized, they will put more effort and contribute more to the organization. In such way, the operational workers will increase productivity and self-esteem.
To solve the problems of inconsistent decision making, Nike should use appropriate team decision making strategy. Normally ideas of high status people or people who should loudest will get attention by other members. Therefore, we recommend Nike to use nominal group technique to solve prioritizing issues such as which resources are the best for company project. It is a technique where all the members brainstorm their ideas without interacting with each other and discuss one by once at the final stage. It is useful in providing effective framework in choosing best option or ranking priorities.
McShane and Von Glinow (2010) defined that “Decision making is a process of making choices among one or more alternatives with the intention of moving toward some desired state of affairs”. People usually do not follow the rational model to make decision in the real world because there are many undefined problem and ambiguous alternatives.
McShane and Von Glinow (2010) defined that “Creativity is the development of original ideas that make a socially recognized contribution”. Creativity allows and encourages people to think out of the box, which produce innovative and unique ideas for a particular task.
NIKE, Inc. is the world leader in athletic apparel, footwear, equipment and accessories. They assist every athlete in developing motivation and creativity throughout the world with using and promoting their products and brand name.
Decision making style of the founders of Nike, Bill Bowerman and Phil Knight has reflects the participative method in the company. Nike involved all levels of the organization in decision making. The employees who have relevant knowledge beyond leader and can help the leader solve the problem effectively.
Furthermore, Nike is playing an important role in creativity which generates unique ideas or products that are valuable to the organizations. Neither in the product design nor advertising, Nike also has tried their best to exert unlimited creativity on it. The creative products and interesting advertisement that created by Nike has help them to produce sustained superior performance.
Last, the integration of Nike’s design, customer and marketing creates a strategy, which is effective and difficult for their competitors to imitate. Nike has provides clear objective and an environment, which promotes the development and sharing of innovative ideas throughout the world.
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