Enterprise Resource Planning - Essay Example

Observation Review Name: University: Date: Assignment One: Observation Review Decision Summary The decision that was made is about the implementation of the Enterprise Resource Planning (ERP) system with the goal of connecting employees in the organisation and facilitates the collection of date in different organisation’s departments basically, ERP system is a solution crucial for managing the important parts of the business, which includes making accurate decisions that lead to critical business initiatives. The ERP system was deemed beneficial because it offers a number of benefits to the organisation such as improved flexibility, productivity, as well as customer responsiveness. Integrating all the core business processes into a single application would facilitate the organisation to maximise the business process efficiency. Besides that, the decision to implement the ERP system was made because it enables the managers to collect accurate information as well as make correct decisions. The decision was made by the top-level managers, which included senior managers, boards of directors, CEO, as well as the internal stakeholders. The decision was made during an internal stakeholder meeting, whereby the stakeholders were involved in the decision-making process through meetings. This facilitated the approval of new ideas such the implementation of the ERP system. The internal stakeholders include the managers, employees, the board of directors as well as other individuals that were potentially affected by the new system. In order to make the decision, the internal stakeholders were invited to attend a meeting, wherein they were expected to contribute to the discussion. In terms of how was the decision made, the CEO involved the employees in the decision-making process in what is commonly known as the ‘participative decision. The CEO deliberately encouraged the employees to participate in the decision-making process by first offering his perceptions, ideas, information and knowledge about the decision to implement the ERP system. Imperatively, the CEO maintained the total control of the decision and was also totally responsible for the bad or good outcome attributed to the decision. The factors the influenced the decision include competition since most of the company’s rivals have reengineered their business processes. Therefore, the company decided to integrate all its business processes by espousing the ERP system. Another factor that influenced the decision is the rapid technology advancement given that technological innovation has forced a number of companies to change in order to remain up to date. The CEO realised that the business could benefit from technological change. Therefore, implementation of ERP systems could result in better customer service and increased efficiency. Other factors include the need to improve the process and the desire for growth. The outcome of the decision include improved customer satisfaction, enhanced communication, and streamlined office tasks. Rational decision making analysis According to the rational model of decision making, people normally make choices that reduce any costs and maximise benefits. People always choose the product that offers the greatest reward at a reduced price. As mentioned by Turpin and Marais (2004), the rational decision-making process involves numerous steps; Intelligence, looking for decision making occasions; Design, creating and examining the possible courses of action; Choice, opting for a certain course of action; and Review, examining the past choices. When utilising the rational model, it is presumed that the decision makers: have knowledge about every possible alternative; understand the consequences of putting each alternative into practice; have set out predilections for such consequences, and can contrast consequences and be able to find out which is more preferable. According to Gabor (1976) decision makers are normally unable or unwilling to recognise the presence of vague non-pragmatic intentions; therefore, even if the decision makers offer full co-operation, it is not clear whether some conscious motives will be established. The figure below an analytical process that was utilised by the CEO to make the decision: Fig 1: Rational-decision-making model (Boundless, 2016) The need to improve profitability and remain competitive has placed the CEO under intense pressure; therefore, he decides to implement the ERP solution in an attempt to solve this dilemma. The decision made by the CEO was partly rational because he used some steps in the rational decision-making model so as to define the best path for the solution. The decision to adopt the ERP solution came after: defining the problem, identifying the criteria of making the decision, allotting weights to the criteria, developing and evaluating the alternatives, and selecting the ideal alternative. The first step taken by the CEO was to define the problem. The main problem was low productivity, customer dissatisfaction and the need to increase profits. Therefore, the CEO had to determine what criteria he will utilise so as to make the decision. The second step was identifying the decision criteria, whereby the CEO selected variables that would define the outcome of the decision. The CEO had to find out the criteria that are relevant that could help him improve customer satisfaction and productivity of employees in the workplace. The criteria were: How will the decision affect the customers, employees and quality? After the identification of the decision criteria, the CEO decided to allocate Weights to the criteria by ranking the criteria that have more importance to the process of decision-making process. The CEO felt that the biggest weight had to be given to how the implementation of ERP solution would affect employees while the other weights were equally distributed. The CEO did not focus much on developing or evaluating alternatives since he had already settled for ERP solution. In the last step of Rational-decision-making model, the decision to espouse ERP system was implemented. After some period of time, the choice was determined to be a good one after the evaluation of outcome since expectations were met. Scott (2013) argues that the rational model epitomises a sanitised vision of how decisions are made in the organisation. Bounded rational decision-making analysis Making rational decisions is when decision makers utilise facts, analytics as well as a precise step-by-step process in order to make a fact-based decision. The economic agents’ behaviour is normally bounded by a procedural rationality instead of being a substantive rationality product. Therefore, the value of bounded rationality is to remain a “process of thought” instead of a “product of thought”: People have alternative to reasonable procedures as compared to the complex computations that are afar their cognitive abilities (Munier, et al., 1999). Bounded rational decisions have some potential issues; For instance, the espousal of ERP system would result in job losses and possibly create new jobs. Therefore, the CEO communicated with the managers about the looming corporate layoff. Importantly, he emphasised the need to use rational decision-making process so as to ensure fairness. The managers’ understand the value of rational process, but it has not been the practical strategy within the organisation. the managers were expected to lay off some employees in their departments within a certain period of time. Therefore, the task immediacy made it very challenging for the managers to use the long step-by-step rational process to solve the problem. The bounded rationality model describes why there exist limits to how rational the managers were in the decision-making environment. According to the model, there are some constraints which compel the decision maker to become less rational. In view of this model, the decision to layoff some employees as a result of ERP solution implementation forced managers to choose the first satisfactory alternative and make decisions by heuristics or rules of thumb. In this case, managers are at ease making decisions devoid of determining every possible alternative. In their study, Aviad and Roy (2012) used the bounded rationality concept to create a decision support technique with the goal of identifying the feature saliency in problems’ clustering. On the other hand, Murata, Kubo, and Hata (2012) used the bounded rationality concept to examine the relationship between cooperative behaviour and group heuristics. They established that group consciousness may help in actively stimulating mutual cooperation. The bounded rationality was beneficial in the decision made because there was no need to meticulously specify the process of reasoning, but instead, it was assumed that whatsoever the decided process, it was adequate to get close to the optimum. Another benefit is the model’s prediction capabilities. Bounded rationality is beneficial because as mentioned by Muramatsu and Fonseca (2012) it acknowledges that a person has tried hard to economise on their information-processing capabilities by depending on different rules of thumb and heuristics so as to make decisions. The decision to layoff some workers after the espousal of the ERP solution was made with no elaborate calculations, but rather through utilisation of frugal and fast heuristics. Without a doubt, such heuristics have an advantage of simplicity and speed, but they have to match well with the decision setting. This is in view of the fact that scores of decision environments are characterised by inadequate information. Individuals that are boundedly rational occasionally fail to make decisions that are in their best interests. As a result, it facilitates efforts to overcome suboptimal behaviour through paternalistic measures. Furthermore, people hardly have complete (or perfect) information. Lack of information requires too many resources and too much time to acquire it. References Aviad, B., & Roy, G. (2012). A decision support method, based on bounded rationality concepts, to reveal feature saliency in clustering problems. Decision Support Systems, 54(1), 292-303. Boundless. (2016, May 26 ). Rational Decision Making. Retrieved from Boundless: https://www.boundless.com/management/textbooks/boundless-management-textbook/decision-making-10/rational-and-nonrational-decision-making-76/rational-decision-making-369-8376/ Gabor, P. (1976). Management Theory and Rational Decision Making. Management Decision, 14(5), 274 - 281. Munier, B., Selten, R., Bouyssou, D., Bourgine, P., Day, R., Harvey, N., . . . Wensley, R. (1999). Bounded Rationality Modeling. Marketing Letters, 10(3), 233-248. Muramatsu, R., & Fonseca, P. (2012). Freedom of choice and bounded rationality: a brief appraisal of behavioral economists' plea for light paternalism. Brazilian Journal of Political Economy, 33(2), 445-458. Murata, A., Kubo, S., & Hata, N. (2012). Study on promotion of cooperative behavior in social dilemma situation by introduction of bounded rationality — Effects of group heuristics on cooperative behavior . Proceedings of the SICE Annual Conference, (pp. 261-266). Akita . Scott, B. B. (2013, March). Decision Making and the Limits of Rationality. Retrieved from Queen's University IRC: http://irc.queensu.ca/articles/decision-making-and-limits-rationality Turpin, S., & Marais, M. (2004). Decision-making: Theory and practice. ORiON, 20(2), 143–160. Read More