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In the contemporary world of business, several companies have many layers of hierarchy where decisions are made at the top levels and then passed to lower ranks. It results in a horizontally broad and vertically deep organizational structure, with controlling spans extending to numerous layers in both ways.

The Decision making Hierarchy

There are various patterns of participation in the process of Decision making. It is a group affair. There is deliberation and elaborate consultation before the chief executive takes the final decision. One has the final authority at this level. The top decision-maker receives all the inputs of information regarding the options and their outcomes. Still, that person needs to process the information and make the decision according to his ability to impose and encourage the rest to accept the same.

The superior Decision making units compile information from the subordinate units and codify the same piece of information to build knowledge in a highly functioning organization. Often, that knowledge is statistical and is used to foresee larger trends. But, the collective knowledge of the superior unit is quite general and can’t be relied upon to make a good decision that will affect subordinate units.

The superior Decision making units have a wide field of facts. But they have a lower resolution regarding the details to implement any decision. The decisions made by select units and passed to subordinate ones for execution are generally troubled by implementation issues.

Thus, the role of the special unit should be to take the acquired information, codify it into knowledge, and then pass it to subordinate units that possess more defined information which can be applied for better implementation. The hierarchy of the Decision making process is efficient and effective as it lowers the cost of acquiring knowledge by getting rid of the need of every subordinate Decision making unit to spend energy and time individually to collect the same information.

Importance of Hierarchy in Organization

Provides Effective Organization

Hierarchy places few skilled leaders at the top of the company directing its operation along with strategy. At different levels of authority, below them are the workers and managers, who carry out the instructions from the leaders. The work system has evolved in most industries. Work is more effective when individuals team up to achieve a single goal, instead of having set goals by many people and carrying out the same by dew.

Ensures Accountability

Hierarchy doesn’t favor senior managers of an organization above everybody else. For instance, a failing chief executive under whose company profits drop, threatening jobs at a company. Organizations with effective hierarchy make the leaders responsible for the results and replace the failures with a new one, maybe through internal promotion.

Creates Unity and Authority

The greater the authority level of the employee, the higher is their hierarchical structure. With leadership comes authority, and it makes sure that everyone under the manager’s command will work towards the organization’s goals, else face discipline. It is shown with the past experiences that without the hierarchy of authority, teams are less likely to put a united front to accomplish their common goal.

Sets up Career Paths

Most of the employees will join the organization at the ground level, holding minimal authority. But mist hierarchies allow the employees to rise the ranks according to their abilities and experience. Hierarchical structure in a company offers opportunities for the promotion and development of employees, which can drive motivation to perform better and enhance job satisfaction.

Managers and leaders don’t stay forever, and they may move for various reasons, and it is helpful to choose successors from within. Besides, when the manager proves incompetent, the hierarchies promote the replacement from junior ranks.

Decision Making Skills in Hierarchical Structure

The Decision making skills are the process you need to use to make choices regarding the direction you want to point your company in. It is different from problem-solving skills, which are reactive when something goes wrong. The Decision making skills are proactive and are used to prevent the crisis from occurring. These skills are based on the vision, mission, values, priorities, culture, short-term and long-term goals, and financial situation of the organization.

You cannot understate the significance of Decision making skills. Without them, the organization would not create new products, downsize, adhere to ethics, impact their industries with changes, hire new employees, or restructure. Good business depends on ethical and good Decision making skills.

Using a set of steps or a formal process for Decision making changes the course of the future. You have the power to enhance the bottom line or reduce it as a manager. Besides, your Decision making skill influences job availability, and it impacts the personal lives of those on your team. With strong Decision making skill, your company will reach its potential and go where it is going, along with those who hold the leadership, will reach where they are heading.

Importance of Decision making in Business

The decisions in business impact your income, the bottom line of the business, the lives of customers or clients, the livelihood of the employees, and company culture. For instance, while you are selecting between product X and product Y might seem like a simple decision and maybe the reason for your meeting to run late, in reality, it is much more than that. This is the reason behind practicing your Decision making skills in your private life. Once you are into the business arrangement, your skills influence your families and your business as a whole, multiple other families and suppliers as well.

Steps in Decision making

As there are different models for Decision making, the following steps are common and help you go through what is best for the teams and the company. The steps are given below:

Simplify the Decision

It would help if you considered the result you want to have from your decision. Scale back the decision from something wide and not known to something more specific and actionable. Like, instead of stating that you want to increase profits, scale it down to selecting the product line to increase the sales in the fourth quarter. It clarifies the decision and action that can be taken as to what to achieve and at what time.

Collect the Facts

It is normal to have a liking for favorite products or favor certain employees, but as a manager, you must keep your emotions aside and focus on the facts. Thus, instead of selecting your favorites, look for the products that will perform best, check out the trends in the market, and how to act in the mission and vision of the organization. Similarly, instead of favoring your favorite employee, take a look at the proven track record of everyone and their educational backgrounds, along with their ability to lead. In addition, choosing the facts to be taken into account while making the decision is as important as choosing the ones not to consider. Remember, too much information can also hamper your Decision making process.

Search for Options

It is time to search for all the possible options with important facts in your hands. It requires creative management to brainstorm ideas and consider various solutions to solve a problem or find an opportunity and get them down on paper. Explore the various options and consider them before moving ahead to the next step.

Weigh Merits and Demerits

Narrow down the options you have jotted to the most likely to offer you the desired results. Then conduct a risk-benefit analysis. Take each option that you have shortlisted and consider the pros and cons of each option to have a better idea of what you will achieve while approaching each path.

Select the Best Possible Option

After seeing the merits and demerits, you can know in a much better sense which options produce the greatest possibility for benefit having the least risk. In such cases, sometimes the organization’s objectives and values mandate assuming some risk. So you must select among the various options as per the objectives of your organization.

Move Ahead

After the determination of the best option for getting where you are going, progress and move ahead in an organized way. Make sure you are aware of the what, where, when, why and who of moving ahead and then lead the process making possible adjustments on the way as you proceed.

Evaluate the Results

Managers are not robots but humans. So it would be best if you learned to improve your Decision making skills throughout your journey with experience. You can do this by evaluating the results of your decision to whether you have achieved the desired goals and to see where you have reached them. Analyze the outcome and take notes of what went well, what you could do differently to get better results next time, and evaluate what went wrong or did not work.

Conclusion

Having hierarchy in an organization is quite effective. It means a graded organization has many successive levels or steps. Every organization has some or another purpose. To achieve that, it divides the jobs into units and subunits. These units help to make an informed decision in the organization to achieve more success and profit.

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