Every organization that expects to be relevant in the current global business environment must be able to make strategic decisions as and when needed. Such decisions may be influenced by factors within the organization such as employees’ demands. They can also result from external pressures such competition pressures or even government regulation (Shapira, 2002). Below is a decision-making process for Riverbank Credit SACCO. This microfinance institution started as a self-help group with seven clients in 2002. Its customer base grew to 6000 members by 2009 and was doing well compared to its peers in the industry. However, the company started experiencing stiff competition from its competitors that threatened its existence (Riverbank SACCO, n.d).
Riverbank credit SACCO had been experiencing a rapid exit of customers to its competitors. In addition, the savings from clients had reduced by 30% within two months and the customers were refraining from taking loans. To identify the problem, the management organized a market research to be carried out by the marketing department within the company’s current markets. The management also set up discussion groups among employees in each department so that they would try to find out what caused the customers to behave that way (Lee, Newman & Price, 1999)
The findings of the marketing research had the following findings: the customers served by the company were mainly low-income earners who made small amounts of income daily. The customers felt that the company’s debt collectors were unfriendly as they harassed defaulters without giving them a chance to explain their financial difficulties. The following problems were identified from both the employees’ discussion groups and the marketing research: the companies had many bureaucratic processes that made it slow to respond to customers needs. For instance, loan records took long to be updated. Hence, the customers were not able to plan effectively on their loan repayment. Secondly, the company’s services were not meeting the customers’ financial needs. For instance, the company expected the loan customers to repay their loans monthly yet their income consisted of small amounts of cash made daily, hence they used the money before end-month, as they could not keep it in their homes (Daft, Murphy & Willmott, 2010).
Analysis of alternatives
The problems identified required non-programmed decisions, as they would involve restructuring of the organization. According to the organization’s culture, decisions that involved made high capital investment, were mainly made by the top management. Therefore, the top management, which consisted of the CEO and the departmental heads, was to deliberate on the available alternatives before they are passed the employees. The first alternative was to employee more employees who would ensure that customers’ account records were updated in time. The second alternative was to adopt technological changes that would help in processing the records instead of human resource. The alternatives were evaluated based on cost of implementation and the expected benefit (Lee, Newman & Price, 1999)
The first alternative was relatively too easy to implement, because it only required requirement and training of new employees. On the contrary, it had a long-term cost, as the employees would be paid for as long as they continued to be employees of the company. The second alternative had a high initial capital requirement, because installing technology was relatively costly. However, the management considered use cloud-computing technology, whereby they would not need to install the whole system in the organization. Still the alternative had a higher initial cost than the first one as all the employees needed to be trained on the technology as well as the customers (Deb, 2006).
The management chose the second alternative as it had more long-term benefits to the organization compared to the first one. The second alternative was to cost the organization $15000 more to implement compared to the first alternative. However, it was expected that it would lead to an average yearly reduction of costs by 11% every year for the next five years. The first option was dropped because, it was only less costly to implement but it would lead to an increase in the yearly costs by 20%. On reaching an agreement, the management decided to communicate the resolutions to all the members of the organization (Lee, Newman & Price, 1999)
Meetings were held in each department to inform the employees of the intended changes; how they would affect them, their expected contribution and the benefits, they would enjoy as well the organization. At first, the employees were skeptical of the changes, as shown by their reluctance to give their feedback when they were asked. Some of the employees felt that adopting the technological changes would make them to lose employment. As a result, they were determined to frustrate the changes. This was a common feeling in all departments, therefore the employees were asked to note down their concerns to see if there were ways they could be helped (Hirokawa & Poole, 1996).
The element of organizational power and politics came up. This was shown by the demands the employees had given the management as conditions that must be met before they guaranteed their support in implementing the changes. The employees demanded that no employee should be sacked because of the changes that were to be implemented. This showed that some influential employees had incited their colleagues to stall the process. The management however, handled the precarious situation in a very ethical way, by considering the employees as part of the organization’s stakeholders. A meeting of all employees was convened and the CEO promised the employees that for every increase in profits, resulting from reduction in costs, the employees would get 5% of the profits as increase to their pay. However, he was reluctant to guarantee that no employee would be sacked, but he promised that incase such happened the concerned would be compensated equitably (Teale, Ispenza, Flynn & Currie, 2003).
The next step of implementation was to draw a plan of how the changes would be implemented. Due to the rapid loss of market share, it was agreed that the changes were urgent. Therefore, the first step was to train all the employees including the management on the technology. At the same time, the technology was being installed in the organization such that when it had been fully installed, the employees were practically trained on how to use it. Some experts were hired on temporary basis in each department to help the employees in catching up and to ensure that services were not compromised (Cassidy, 1999).
The next stage was restructuring of the processes. The cloud-computing technology would enable the employees in the accounts management department to process the records on a daily basis with improved efficiency and effectiveness. The marketing department was to train the customers on the new changes. They were also to do daily collections of savings and loan repayments from the customer’s operation places. Due to the daily updates of records, the marketers were to bring the customers’ loan and savings data to the office on a daily basis for updates. The employees in the accounts management department were to work in shifts (day and night), to ensure that customers’ records were up to date daily. The marketers were to take the morning session of their working hours training the customers on the new technology and in the afternoon, they would go for customer collections. They also would be required to work on weekends, so that no day would end without collections being made (Lee, Newman & Price, 1999)
Outcomes and Feedback
There were both positive and negative results. Some of the negative results included: The Company only realized a 5% increase in profits, which was below the set target of over 10%. This was because the company was forced to borrow more money to finance the installation costs. The customers were at first reluctant to embrace the change. This is because most of the customers served by the company are semi-illiterate. However, after continuous training they became receptive to the new idea. On the positive side, the company reduced its operation costs by an average of 18% for the first two years. Defaults in loan repayment decreased by 50%, while savings increased by 32% over a period of two years. The company also increased its market share by 17% over the same period (Kusek & Rist, 2004).
It is apparent that the alternative was relatively successful because some of the set targets were met or even surpassed. It is also evident that decision-making process in an organization will be encountered with many challenges. This is especially true in the case of non-programmed decisions that involve restructuring of the organization. This is because an organization has different stakeholders that have different interest and are seeking to meet their needs through the organization. Therefore, it is important that those stakeholders are actively involved in the decision-making process so that they would execute their roles effectively.
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