In the dynamic world of business, operational decisions hold the key to efficiency and success. They’re the day-to-day choices that keep an organization operating smoothly. And their ripple effects, though they may seem small at first, can have significant impacts on overall performance.
However, making effective operational decisions isn’t always as simple as it might appear. It requires an intricate balance of knowledge, analysis, and instinct. More than anything, it calls for a deep understanding of the organization’s goals, resources, constraints, and business rules management systems.
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What are Operational Decisions?
Operational decisions or Operating decisions are decisions made to manage day-to-day business. Any firm that is into any kind of business is faced with 100 decisions they have to make in a day. These will be as mundane as refilling the water cooler, to as stressful as fulfilling a customer’s order within minutes.
Naturally, operational decisions have to be taken care of by a manager in charge of the operations. However, it is not as easy as it sounds because the number of operations can be mind-boggling. On any normal day, McDonald’s sells 75 burgers a second, or 64 million burgers a day across the world. Think about the number of simple operational decisions that, if not taken properly, can destroy the experiences of customers visiting McDonald’s stores.
Types of Operational Decisions
Typically, operational decisions in any business are of the following types:
1) Pricing – Go to any retail store and you will find customers haggling over price. Now, if the owner was himself involved in such operational decisions, the firm would go down the drain soon. Instead, the owner or the manager gives price levels and margin levels which are to be maintained and hence the decision is made by the employee.
2) Discounts – In channel sales or in network marketing, the daily sale as well as daily purchase is so high in quantity, that discounts play a major role in which brand the dealer will push in the market. Hence, managers should have all the information on current discount levels in the market and what discounts to give to dealers which are ultimately given by executives. In short, channel-level operations have to be managed properly.
3) Promotions – Promotions involve a lot of operating decisions, like how to promote the product, and which areas or mediums will give the best ROI after promotions. Similarly, getting the promotional material ready and ensuring that the promotions are done properly in the market are all operational decisions that are to be taken from time to time.
4) Collecting information – Now this is a task that is huge and can make a big impact in the altogether running of an organization. If you look at it from the bottom-up level, there is a lot of operational information also collected, which has to be summarized at the manager level and finally submitted at the director level.
The above 4 are the major operational decisions that have to be taken every day and hence are mostly outsourced or are managed via a chain of command in between. Besides the above, there are other operational decisions also which are made in the day-to-day running of a business.
- Maintaining Inventory
- Logistics decisions
- Sales and outreach
- Employee management
- Customer management
Overall, calculating the time spent on operations is important for any organization as you don’t want to waste your resources. And hence, MBAs generally have a subject known as operations management, which emphasizes the importance of time and how to achieve a task in as less steps as possible.
As a business grows, the operational decisions needed to manage the day-to-day activities increase. Hence the business needs to hire employees, or an organization needs to hire managers to manage such operational decisions.
Characteristics of Operational Decision
- Accuracy: Operational decisions need to be precise and accurate. An inaccurate decision can lead to inefficiencies and result in unnecessary costs or missed opportunities. Accurate decisions are integral to achieving the desired business value.
- Flexibility: The fast-paced world of business requires operational decisions to be flexible. Circumstances can change rapidly, and the ability to adapt decisions to suit new situations is crucial. Flexibility ensures that a company can pivot quickly when necessary, enhancing its competitive edge.
- Consistency: Consistent decision-making ensures stability and predictability within an organization. Employees and stakeholders can rely on a consistent framework of decision making, fostering trust and enabling the company to maintain its course even amidst market fluctuations.
- Timely: Timeliness in operational decisions is critical to seizing opportunities and mitigating risks. Delayed decisions can lead to missed opportunities, while prompt decision-making can provide a competitive advantage.
- Cost-effective: Operational decisions should not only focus on enhancing productivity and efficiency but also on cost-effectiveness. A cost-effective decision maximizes the output for the resources invested, thus contributing to the overall profitability of the business.
Importance of Operational Decisions
1) Helps in making result-driven decisions
Operational decisions are essential for achieving business objectives. Clear and accurate operational decision-making processes play a significant role in ensuring that an organization’s goals are met. By leveraging the right decision management system, companies can make informed decisions that yield reliable results.
2) Improves operational efficiency
Operational decisions can help improve the efficiency of an organization’s production process. Automating operational decisions provides organizations with faster and more accurate decision-making capabilities. This helps to streamline operations and ensure that resources are used effectively.
3) Enhances customer experience
Operational decisions can also increase customer satisfaction. By leveraging the right decision-making tools, businesses can make sure that each customer is treated according to their individual needs. This helps strengthen customer relationships and ensure a better overall experience for customers.
4) Improves the company’s bottom line
The long-term impact of operational business decisions can be seen in a company’s bottom line. Making the right operational decisions helps businesses increase their profits and build a successful business model.
The importance of operational decisions cannot be overstated. By leveraging decision management solutions, businesses can make sure that they are making the best decisions to maximize their resources and ensure profitability. Automating decision-making processes can help businesses save time and money, while still providing reliable results. By making informed decisions, businesses can ensure that their operations are running smoothly and efficiently.
Some of the key examples of operational decisions are
- Inventory management decisions
- Scheduling and production decisions
- Quality control and assurance decisions
- Pricing and sales decisions
- Supply chain management and logistics decisions
- Decision management systems used to optimize operational decision structure
- Other business-oriented solutions used to automate operational decisions
Operational vs Strategic Decisions
Strategic decisions focus on long-term objectives and comprehensive plans while operational decisions are more focused on short-term goals. Operational decisions tend to be more concerned with the day-to-day running of an organization, ensuring all parts of the operation align with the strategic vision.
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