For analyzing the topic on hand I have selected Wal-Mart. Wal-Mart is the world's leader in retail business enjoying the majority of the market share in the retail business. The company has occupied this position through its dedication towards satisfying customer's needs and wants in better way as compared to competitors by providing superior quality products at competitive prices.
As information technology is advancing with the passage of time, organization is learning new means of transacting its business. These new areas include innovation, problem solving and decision making. A decision is a choice made between two or more alternatives (Robbins & Coutler, 2004). According to George and Jones, decision making may be defined as "the process by which members of an organization choose a specific course of action to respond to both problems and opportunities" (George & Jones, 2005). An example of decision of Wal-Mart will be to price its various offerings. The manager has certain alternatives for the pricing decision. Decision maker across organization different types of condition, each required different strategy towards decision making. Organization usually takes decision in response to a problem or an opportunity. This can be of two types: structured and unstructured. Structured problem are routinely encounter by manager and are to some extent straight forward. On the other hand unstructured problem non-routine and manager lakes the needed information to solve problems. The various types of decision a manager makes in his capacity as decision maker has been summarized in Figure 1.
Figure 1: Decision Making
Programmed decisions are those decision that manager makes in response to structure problems and routine in nature. The decision maker can make this type of decision with relative ease as compared non-programmed decision because the information needed to solve the problem of an organization is available. Decisions made at middle level and lower levels of management by Wal-Mart are mostly non-programmed decisions. Programmed decision can be divided into three types:
Series of interconnected steps that are taken in chain to solve a structured problem is called procedure. An example of procedure will be the recruitment procedure for a new employee followed by Wal-Mart HR Manager.
Rules are unambiguous statements that set parameters for a management action. Simply the "do's" and "don'ts" of an organization can be called rules. The example of rules for Wal-Mart will be the statement regarding the absenteeism.
Policy set out boundaries within which a manager can exercise his power of decision making. According to Robbins and Coutler "policy is a guide that establishes parameters for making decisions rather than specifically stating what should or should not be done" (Robbins & Coutler, 2004). An example of policy for Wal-Mart will be the firing decision used by the manager in the circumstances when his subordinates don't obey his orders.
Non-programmed decisions are those decisions that are taken in response to unstructured problems. These problems are usually non-routine in nature and the problem involved is unusual, and the available information is incomplete and ambiguous. Non-programmed decision requires management creativity and is best handled by professional managers who have the ability to strike through. Decisions made at the top level of the organization hierarchy of Wal-Mart are usually non-programmed decision.
Information and Decision Making:
Information is the vital component for the decision making. In fact the success or failure of decision rests on the information on hand. Situation in which a manager have full information regarding the problem is available is called certainty (for example what revenue Wal-Mart will earn from the sales of Fairy washing powder if the price is increased by 10%) and where the range of information is neither perfect and neither imperfect it is called risky decision making (for example what revenue the organization will earn if it increase Fairy Washing Powder by 10% per unit) while the situation where the decision maker have no information regarding the problem on hand is called uncertainty (for example what revenue Wal-Mart will be earning after 5 year from all the business the organization undertakes).
It means that the outcome of a decision (certainty, risk, and uncertainty) rests on the available information regarding a decision making situation. The chances of the success of decision increases as the manager have more and more information.
Internal and External sources of Information:
An organization required two types of information: internal information, and external information. Internal information are gather and used for the decision making purpose inside the organization while the external information are gathered by managers that provides an organization intelligence information regarding the outside parties including customer, society, competitors, government etc.
Usually organization use some sort of information system to develop and maintain the internal sources of information. For example of Wal-Mart used an express Management Information System (MIS) for its information gathering and dissemination purposes, this system will provide the internal information needed by manager in decision making.
According O'Brien and Marakas "an information system can be any organized combination of people, hardware, software, communication network and data resources that stores and retrieves, transforms and disseminate information in an organization" (O'Brien & Marakas, 2001). It means that the internal sources of information can be people (management and employees working in Wal-Mart), hardware (computer systems, fax machine etc used by Wal-Mart), and software (databases, spreadsheets, word processor etc used by Wal-Mart) communication networks (Local Area Network (LAN), Wide Area Network (WAN), intranets, extranets etc. used by Wal-Mart), and data resources (Management Information System (MSI), Decision Support System (DSS), Executive Support System (ESS) etc used by Wal-Mart).
The external sources of information provide most valuable information regarding the organization environmental factors. Wal-Mart environmental factor consists of economic factors, demographic factors, technological factors, political-legal factor, and socio-cultural factors. This information is of very importance for the business organization because the organization environment serves as an obstacle between the firm and its target market. Through proper scanning of the environmental factors managers are able to devise his strategies keeping in view the dynamic environment (Kotler & Armstrong, 2010).
Examples of Decision Making:
An example to clarify the decision making process at Wal-Mart will be a programmed decision: whether to decrease the price for Fairy washing powder by providing 10% discount or continue with the existing pricing. The first step will be to identify the problem (the stagnant sales), Wal-Mart then need to identify the objectives of the decision making (to increase the sales of Fairy), the generation of alternatives (an example will be to reduced the package size, to reduce the price, to offer additional product(e.g. bath soap) free with Fairy etc), evaluation of alternative on the basis of decision criteria and selection and implementation of alternative that may have the best outcome (sales maximization for Wal-Mart).
An example non-programmed unstructured decision making for Wal-Mart may be a decision in case if the front disk officer did not report at work on a particular day. This is non-programmed decision because the organization usually did not encounter such problem. Now to solve the problem through the process of decision making Wal-Mart may make some adjustments in the available workforce by assigning the work to an individual who have the needed experience to perform the task without having serious consequences to the overall system.
Personal Networking and Decision Making:
According to Foster and Seidman personal networking, "is the outcome of each individual's "social decisions" - that is the outcome of a set a set of "choices" by each individual in the population" (Foster & Seidman, 1998). By using the social network an individual working at decision making position in an organization is better able to make decision due to the variety of information that are at the disposal of decision maker. When a manager who is responsible for making key decision takes the input of various individual through his personal network he is better able to make sound decision due to input from the various people that form his personal network (EMC, 2010).
For example a manager is making decision that involved issues related to workforce diversity. If he reject a candidate that he think is not fit for the job, he can sue the organization as well as the manager for violating laws related to equal employment opportunities (Stacy, 2002). In this case if the manager who makes the decision took the needed input from a lawyer who is a member of his personal network the situation could have been vary change as the one that has been experienced by the manager.
In organization there are two types of relationship: one that is governed formal authority is known as organization structure and in the informal relationship that is governed by organizational culture. Organizational culture bridges the informal relationship between the various human resources that works in various department of the organization. The organization culture helps manager to form personal network across the organization, that in turn helps the organization through informed decision making that takes into account the organization long-term strategy as well as the organization environmental factors into account when making decision that affect the future of the organization. As pointed out by Pedersen and Larsen in personal network "each player in the network acquires specific knowledge from other players for decision support" (Pedersen & Larsen, 2001).
When many people have their inputs in the organization decision, the quality of decision making automatically enhances due to collective thinking, judgment, and evaluation of future through consolidated information that are obtained through personal network by the manager. When such characteristics exist, it leads to effective and efficient decision making that have synergistic effects and more chances of being an accurate and reliable decision.
Communication Process in Wal-Mart:
The process of transmitting ideas to someone is called communication. Communication can occur through different processes and methods and can also be classified on the channel used and the style of communication. On the basis of channels communication can be divided into verbal communication (communication in written or oral form) and non-verbal (communication through body language, expressions, visuals etc.)
Oral communication is the transmission of messages in face-to-face conversation. For example a meeting of inventory management department at Wal-Mart has been called in which all the different managers of inventory management department took part. At times oral communication lead to clear communication results as the respondents can ask question and the other party can provide immediate feedback. On the other hand oral communication may lead to some miscommunication as no written records are kept for the communication. For example the Shift Manager writes memos to all the functional heads regarding the new office timing. In written communication the sender and receiver exchange messages in written form, but this method served from the fact that the parties in the communication process may not be able to provide immediate feedback. According to Leavitt written communication need careful preparation of messages because anything put in writing become a public record (Leavitt, 1991). On the basis of style communication can formal and informal. Formal communication use organization channels to transmit or received messages. For example the communication between Vice President Marketing and Marketing Manager of Wal-Mart regarding the new promotion budged can be called formal communication. Formal communication can be upward, downward, or horizontal. In upward communication (when Marketing Manager writes to Vice President Marketing)-a subordinate transmit a message to a superior using the organizational structure of the firm. On the other hand in downward communication (from Vice President Marketing to Marketing Manager) a superior (Vice President Marketing) transmits a message to subordinate (Marketing Manager), while the horizontal communication is between two peers working at the same level of organizational structure (For example the communication that took place between Brand Manager Group A and Brand Manager Group B).
The informal business communication took place between the organization's as a result of strong Wal-Mart culture that shape the informal relationship between the various members of the Wal-Mart. In informal communication member of Wal-Mart exchanges information through in unofficial manner using grapevine. An example of the informal communication in Wal-Mart will be the discussion regarding the store layout at the lunch between Marketing Manager of Wal-Mart and R&D Manager of Wal-Mart (Swidler, 1987).
Improving Communication at Wal-Mart:
For effective communication in Wal-Mart it is vital to recruit, train and develop suitable people across the organization. The communication within and outside the company will have impact only when the receiver (one who receives and interpret the message) pursue exactly what the sender (a person who transmit and idea or message) mans. This depends a lot on the people inside the organization (Bavelas, 1990). If a group inside Wal-Mart are talented and have mature personality they will interpret the message by using their professional skills acquired through various training and development. If the case is opposite, the organization will be facing difficulties in every wake of life. Communication skills of employees will also add goodwill to Wal-Mart (Usray & Matz, 2006).
People in today organization serve as a source of competitive advantage. In fact the success and failure of an organization depends on what type of people the organization has. If the organization has professional people in various departments, they will communicate effectively with each other. In this case the organization will be able to use the proper communication process that will ensure that the target understands what is stated and implied in the message. Through such a channel, a source develops a message, transmit it to an audience via some form of medium, and obtain feedback from the target.
On the other hand if members of the organization lack professional competencies it will affect the individual work as well as the organization as a whole. As the members of the organization will not be able to transmit effective ideas in efficient manner as well as not understand the idea that they have received from other sources. The organization will not be able to achieve its goals and objectives as it will be wandering here and there due to absence of proper communication.
The organization that employee professional people in the communication process are able to complete their tasks in more efficient manner, as they are able to decrease certain costs (e.g. time, printing, telephone etc). These costs savings adds to the value of the firm because fewer expenses are shown in the income statement. Moreover the organization having proper people in the communication process is able build an overall image for the organization. The image that has been built resulted from the use of proper communication method, by effectively utilizing organizational resources.
Weakness in Wal-Mart Communication System and Suggestion for Improvement:
Wal-Mart is using a diverse structure. Due to this structure the organization is experiencing some definite problem in the communication process, because the organizational structure of Wal-Mart is neither based on function, nor on product or region. It is somewhat complex and a combination of all the three structure-product, function and geographic organizational structure.
Due to this structure the organization may experience some communication problems, because people in a department will be having different background. Due to this background there will be high chances of miscommunication between the members of the organization. The organization may also experience in allotting tasks to various employees, motivating them in professional manner, and agreement on tasks goals and objectives. Due to these problems it is suggested that the organization should go for functional structure (Lehman, Carol, & Debbie, 2007).
A functional structure is an organizational arrangement where people that perform the same function (for example marketing) are grouped together and called department. When professional having the same background works together the chances of miscommunication decreases, and people can understand one another in a more coherent way (Kalkota & Marcia, 2001). Moreover the motivation of employees also increases when they work with people of the same background while organization is also able to achieve its mission and objectives in a more coherent way. Due to these reasons Wal-Mart should change its organizational structure and should use the functional arrangement of organizational structure.
Information Use by Wal-Mart:
According to O'Brien and Marakas, "an information system can be any organized combination of people, hardware, software, communications, networks, and data resources that stores and retrieves, transform, and disseminates information in an organization". (O'Brien & Marakas, 2001). Wal-Mart uses a variety of techniques of information for collection, formatting, storage, and dissemination of information. These information systems include the following:
Transaction Processing System (TPS):
TPS process data that have been resulted due to transaction, and update the firm's database accordingly. TPS may also helps the business by preparing various business documents including sales invoice, inventory record sheet and other accounting statements.
Decision Support System (DSS):
DSS is used by organizations to provide support to decision makers by providing them relevant information relating to a particular situation. Example of DSS is profitability forecasting by marketing manager, information provided regarding product pricing decisions, risk analysis system etc.
Proposed Information System for Wal-Mart:
Although the information systems used by Wal-Mart (TPS and DSS) is fulfilling the needs of the organization and serving the organization appropriately, but still there is some information gap that needs to be fulfill. The organization is therefore suggested that besides using the above-mentioned methods it should also use the following methods:
Management Information System (MIS):
According to O'Brien and Marakas, management information system provides information in the form of pre-specified reports and displays to support business decision making (O'Brien & Marakas, 2001). For example procurement manager of Wal-Mart can use its networked computer and web browsers to get instant displays about the inventory of various inventory items, and access the supplier's computer to place orders for inventory items whose level have reached the minimum level of inventory.
Executive Information System (EIS):
ESS uses the key information of MIS, TPS, and DSS and other sources and furnished key information to the organization top management to be used in decision making. An example of ESS for Wal-Mart will be the monitoring information related to a particular competitor marketing activities from MIS, DSS and other sources and then furnishing this information to organization the Marketing head of Wal-Mart for the appropriate action. The head of marketing well then use the stated information to tailor his marketing strategies in efforts to tackle the competitor.
Advantages of the proposed Information system:
Support Business Processes:
The proposed MIS and EIS will enhance the organization information resources, and the Wal-Mart will be able to use it as a competitive advantage. The company can use these systems to support its various functions including finance, marketing, production etc.
Support Decision Making:
The proposed MIS and EIS will also help Wal-Mart store managers and other business professional to make better decision. For example, decision on what lines of electricity need to be added or discontinued, or on what kind of investment they require, are typically made after an analysis provided by MIS and EIS (Christenson & Clayton, 1997).
Strategy for Improving Access to Information and Knowledge:
In the last two decades, the world has experience extraordinary changes the way information were created, stored, disseminated and used. Information is now been cited in management literature as a vital resource like financial resources, human resources etc. An organization like Wal-Mart should use the following strategy to get maximum of the information resources and the associated knowledge.
Digital technology used by organization has change the way information was created and used by organizations. This has created new opportunities as well as new threats for a business organization. Strategies that were used previously did not work in today environment (Sambamurthy, Bhahrdwaj, & Grover, 2003). As technology is evolving with the passage of time, the strategy for strategic leadership in the field of information and knowledge management need to be reconsidered. The extraordinary speed of information technology coupled with change in organization culture has resulted to an inaptness of information systems between various functional departments, and a need for investment in strategic information more effectively (Stacey, 2003). The organization should focus its efforts on creating effective management and leadership. The experience of these individual will give the organization experience that can be used more widely to use it for competitive advantage.
Managers that will lead the organization of tomorrow need to be knowledgeable. Good knowledge on the part of manager requires that the manager should be involved in maximizing the value of information and turning it into knowledge, that will results in more informed decision making (Wiig, 1997). Organization information management should be linked with good knowledge management. If this is not the case the value of information as an asset of the organization will be undermined, and the organization will thus not be able to provide cost effective and efficient services to its target market.
The process outlined in the paper (effective decision making, communication and information and knowledge management) will help Wal-Mart to achieve better result and enhance its competitive advantage in its quest to realize the organization mission more effectively and efficiently.