One: It is important for larger organizations to separate the decision-making process to ensure control is not given to one sector of the company. Doing so may result in bias decisions which may not be in the best interest of the company financially. Companies should have a hierarchy system which creates a balance as it relates to the decision-making process. For example, I use to work for a large government agency in which we operate multiple different department and regulations are always changing which not only affect the lives of individuals receiving services but how our company operates and practices according to government mandated regulatory guidelines, as well as the payee sources. The agency in which I work like many government agencies is governed by OPM then we have an administrator who serves similar to the CEO, then each of the 10 offices has a director and deputy director and in the larger bureaus they have a division director, then there are administrative officers, managers, supervisors, specialist and direct support staff. Although the decision-making process does not always involve lower level management and staff, all levels of management are held responsible for enforcing the decision-making process thus creating a culture of accountability and control within their limits. According to Brickley, Smith, and Zimmerman (2016) “divisional managers might have approval rights over certain initiatives of lower-level employees while at the same time have to request authorization for the division’s capital expenditure plan”. Allowing the same person or group to be in control of both decision management and decision control is not a wise choice (Brickely et al., 2016). This is especially important when there are monies involved as it pertains to the economics of a company.
JP Morgan announced it was separating its decision management and decision controls in September of 2013. According to Rob Wherry with Morningstar (2011), JP Morgan’s board of directors’ monitors fund lineup throughout the year, receives operational data, and monitors other significant information to make key decisions. Prior to JP Morgan making the decision to separate its decision management and decisions control, JP Morgan experienced significant trading losses which hurt the firm’s reputation. Unlike larger companies, smaller companies may have one person making all four steps in the decision-making process, such as the owner (Brickely et al., 2016).
References
Brickley, J., Smith, C., and Zimmerman, J. (2016). Managerial Economics and Organizational Architecture (6th Ed.). New York, NY: McGraw-Hill Education.
Wherry, R. (2011). “Why JPMorgan may have the best strategy on wall street.” Morningstar (February 3). Retrieved from http://www.businessinsider.com/an-inside-look-at-j…
Two: According to Brickley et al, 2016, the decision management is the initiation and implementation of decisions and decision control is the ratification and monitoring of decisions. These two process are not the same when it comes to making decisions. Decision management and decision control should always be separated if the company has expenses to do so.
Decision management uses two of the four characterization that divides the decision-making process. The first is initiation, this is the generation of proposals for resource utilization and structuring of contracts. The other is implementation, the execution of ratified decision. The goal of decision management is to improve the decision-making process by using all available information to increase the precision, consistency and agility of decisions and making good choices taking known risks and time constraints into consideration (Rouse, 2019).
Decision control utilizes the other two of the four characterization. One is ratification which is the choice of the decision initiatives to be implemented. Second is monitoring, a measurement of the performance of decision making and implementation of rewards.
Walmart is an organization that is ran by different levels of a hierarchy. Their operations management has 10 decision areas (Smithson, 2017). The CEO of the company has little stock in the company therefore, he/she does not reap the rewards of decisions that will only be rewarding to him or her. The company has three major levels of hierarchy and each level will have decision management and decision control. This is ok as long as one person does not have both (management and control) on the same decision. In the beginning, Walmart was running as a combined decision management and control. As the business grew the two became separated.
A small organization or mom and pop shops will combine the decision management and decision control. This is usually due to extra expenses that they can not afford. The owner will benefit in incentives from the decision that are made. Hopefully they will also give employees, if they have any, incentives that will benefit from the decisions that are made.
I believe decision management and control should be separated if the company has the expenses to do so. One individual should not be making the decision management and control. The principle of separation of decision management and control suggest that empowerment should not mean that an employee has all rights to a particular decision (Brickley et al, 2016). This is also the same as checks and balances. Decisions will be made fairly and not one person will benefit, but the entire company and shareholders will benefit from all decisions that are made.
References
Brickley, J., Smith, C., & Zimmerman, J. (2016). Managerial Economics and Organizational Architecture, 6th Edition. New York, NY: McGraw-Hill.
Rouse, M. (2019). Decision Management. WhatIs.com. Referenced from https://whatis.techtarget.com/definition/decision-management.
Smithson, N. (2017). Walmart: Operations Management 10 Decisions, Productivity. Referenced from http://panmore.com/walmart-operations-management-10-decisions-areas-productivity-case-study-analysis.
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