Discuss about the rational decision-making.
Campus drift helps various companies to promote themselves amidst the students, and it is done with the support of 450 in-house experts who come up with creative content and ideas for supporting various firms and organizations. Although, the company started off pretty well and had a significant impact on the market in the Asian countries but then soon it was losing the lustre and power of attracting clients. The reason was simple enough to understand, the pay of the experts was fixed without keeping in mind their educational qualifications and experience because of which some experts were getting paid more than their capabilities which led to less profit for the organization while others felt that the pay was below par and hence, they had no motivation for working to the best of their potential. The head or the CEO Nikhilesh Mathews decided to convert the pay system from fixed salary to an incentive model under which base salary was kept high but along with that the additional compensation was given only to the superior and better experts and secondly, changed the office days system from a six day system to five day system and making the sixth day as WORK FROM HOME.
Nikhilesh wanted to publicize the change such that all the workers feel motivated and have the zeal to work harder for the company and a=moreover all the workers will be paid as per their capabilities and the company will also be able to attract more client.
Earlier, the experts did not use to entertain customers in an emphatic manner as they were sure of getting fixed salary but now they were tempted by additional pay. Nikhilesh was able to smarty cut down the pay grade and increase the profits for the company and along with that the experts were also happy with the change as they felt alive while working.
Some of the major factors which influenced the decision were degrading client base, sloppy and boring work environment, experts taking the wrong advantage of the salary based pay model, downgrading profits of the company, lack of interactive and creative content and the experts did not find themselves accountable for company's downfall.
Analysis of rational decision-making
Now we know about the changes made in the organization and the outcome of the changes which were made. In case, there is any confusion, let us remind the two necessary changes or decisions which were taken by the CEO of the company, Nikhilesh Mathews. Firstly, the wage system has been modified from a salary based model to an incentive+ base salary model. Secondly, the working days in office were changed from 6days a week system to 5days a wee with the sixth day being converted into WORK FROM HOME.
Now let us analyze these decisions with proper tools of rational decision making. We will first examine the decision of changing the pay grade system (The Web, 2016).
Before analyzing it with analytical decision-making tools, let us understand the concept of rational decision making.
It is a system under which an option is selected over other options through a systematic approach. A manager uses a range of logical step for reviewing the relevant facts, possible outcomes, and observations before finally deciding on a course of action (Boundless, 2016).
Step 1 Formulations of goals (Seymour, 2006)
- Changing the pay grade system from fixed salary system to an incentive + base salary system
- Changing the office working days from six days to five days a week with the sixth day being WORK FROM HOME.
Step 2 Identification of criteria for taking the decision
- Downgrading value of the company
- No motivation for the workers to work enthusiastically
- Attracting more clients with creative experts who have the opportunity to gain more
- Creating a work-life balance by WORK FROM HOME system
Step 3 Identification of alternatives
- Instead of WORK FROM HOME system, daily working hours could have been reduced from 9hours to 8 hours and half days on Saturdays
- Dividing the experts in category such as A, B, C, D as per their level of experience and working capacity instead of such a drastic change of changing the wage system
- Reducing the number of experts and giving the remaining experts same salary and focus on developing these specialists in a much better way
Step 4 Performing different analyses
- The best option is to ask the experts themselves by giving them feedback forms and expect more than 75% of these employees to provide actual information and act accordingly.
- Conducting polling inside the organization and taking the right decision as per the majority census.
- Looking at the working of competitor and what suits them best
- Taking example from some of the successful firms who are in the same business
Step 5 Finalization of a decision
The final decision made by Nikhilesh for his organization has been entirely correct keeping in mind different limitations and alternatives. The decision has been rational because none of the employees was removed forcefully. If he had decided to curtail hi workforce then, in that case, the company would have had to issue lots of notices and in some cases the expert might have even lodged a case against the company hence, degrading the image of the company s an employer. Curtailing the work hours in such a business like this where demand is more and suppliers are less would mean cutting off profits and in turn the client base. Hence, the decision of WORK FROM HOME is entirely perfect as it provides the fluidity which every expert yearns for in his career and maintains a work-life balance.
The following table will help us in understanding the process
Analysis of limitations on the decision-making
It is important to comprehend the concept of bounded rational decision making. The concept revolves around three unavoidable criteria or circumstances namely the limitation of time which an individual has for taking a decision, it is possible for human mind to evaluate and analyze the available information last but not the least many times only scant information is available, and the effects and repercussions of this information are also not reliable (Web Finance, 2016).
The decision making in this company could have been bounded by some reasons namely the person in charge i.e. Nikhilesh was under a lot of stress as the company was rapidly going down, and he had to make a decision quickly. This means that he did not consult a professional before taking such a big decision, and this might have a problem shortly as this decision had been made just eight months ago. Secondly, the decision has been achieved in a short period, and such drastic changes could have been avoided if a bit more research would have done. As per our analysis, the decision has been a good one for the firm, but it could have back fired him as no analytical approach was available. Hence, the decision had limited scope of knowledge on the part of the decision-maker. The decision of work from home might attract the current set of experts to look out for other tasks FROM HOME opportunities from different companies, and this will reduce their productivity in Campus Drift. So, the WORK FROM HOME activities of these experts needs to be monitored in a proper manner by the company. Incentive base working might lure the experts to exploit more from the client which will result in customers taking help of the business just for once instead of creating longer relationships. Hence, an upper limit should also be set for the workers and this all information has been extracted only after we analyzed the different facets of the decision taken by Nikhilesh. These were missing from his decision making as he is taken the decision to attract the attention of experts and bring about a drastic change in a failing enterprise. Hence, the approach is right, and the decision made has been perfect but it is important to ensure that this ruling is kept intact, and this is possible only by providing certain checkpoints are met by the management and the experts (Doyle, N.D.).
It can be said that the decisions as mentioned above have been duly analyzed with the help of rational decision-making tool and the final determination has also been passed through the critical eye of the bounded rationality. The firm had a choice of various alternatives, but it seems to have chosen a rational decision but unfortunately, the company is not ready to keep these decisions guarded and intact if some discrepancy happens in near future. Now, when the firm is ready t should ensure that there exists a contingency plan for keeping the company from falling apart and ensuring that all the experts are paid as per their capabilities, and secondly, the experts are not exploiting the clients for increasing their incentives.
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Seymour, B. (2006). Frames, biases, and rational decision-making in the human brain. Report, 313(5787), 684–687.
WebFinance (2016a). In BusinessDictionary.com.
WebFinance (2016b). In BusinessDictionary.com.