Importance of Decision Making in Management

by Lauren Nelson; Updated September 26, 2017
Managers make decisions every day, all of which have consequences.

Business consultant and expert Henry Mintzberg described the importance of managerial decisions most concisely when he said, "Management is, above all, a practice where art, science, and craft meet." However, a thorough understanding of the importance of decision-making in business reveals that decision-making at the highest level impacts every aspect of a business.

Employee Retention

Effective leadership impacts an employee's decision to stay or leave a company. Thus, the decisions a manager makes have a resounding impact on the company's overall employee retention numbers. Mark Ernsberger, CEO of management consultancy firm Farr Associates, explained in a 2003 Washington Business Journal article, "If you ask employees what it would take to improve employee retention, they cite manager-related behaviors." This is significant because, as a 2007 literature review of company turnover cost estimates concluded, a company loses just under $10,000 for every employee who leaves.

Efficiency

A manager's decisions often impact how an office functions. This can alter the pace and consistency at which individuals are able to work within the system. Peter F. Drucker, in his book, "Management: Tasks, Responsibilities, Practices," explains that the decisions of a manager can speed or slow the pace of work tremendously. For example, if a manager decides that extra paperwork will be required for each transaction processed by a sales representative, it may slow down their pace. If a manager decides to invest in automated filing systems for processing those same kinds of forms, they may save the employees a large amount of time, speeding up their work.

Customer Satisfaction

A manager's decisions can largely impact customer satisfaction. First, managerial decisions can affect an employee's job satisfaction, which in turn affect their customer service. A 2002 study conducted by Aspect Communications and the Radclyffe Group found that individuals served by people reporting high levels of satisfaction with their jobs were far more satisfied with their customer service experience than those who were served by people reporting low levels of satisfaction with their job.

Company Reputation

Managerial decisions affect the well-being of the entire company they decide for. Every day, managers are faced with important decisions about product development, marketing and safety. Their judgment can make or break the company as a whole. For example, British Petroleum, or BP, in Congressional Testimony in 2010, admitted that hours before an explosion that killed 11 oil rig workers and released hundreds of thousands of gallons of oil into the Gulf of Mexico, managers on the rig were aware of abnormalities and warning signs, but chose not to take action. That choice led to what became one of the most devastating oil spills in history, causing millions of dollars worth of damage to the shoreline and wreaking havoc on the area's delicate biodiversity.

Managerial Job Security

On a more micro scale, a manager's decisions impact his own livelihood. Failure in judgment may not always have stiff consequences, but in some instances, poor decision-making can cause a manager to lose her job. Drucker explains that a company cannot succeed with a talented staff and valuable product; they need strong leadership to point their efforts in the right direction. As such, a manager's decisions can indicate his ability to lead, and his suitability for the position he currently holds.

About the Author

Lauren Nelson was a nationally recognized public speaker and debater for eight years and has three years of contracted technical writing under her belt. Nelson is a graduate of Western Kentucky University with a Bachelor of Arts in corporate and organizational communication and is currently serving as Director of Communications for Attain Capital Management.

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