What are operational decisions and their role in business?

Operational decisions or Operating decisions are decisions made to manage day to day business. Any firm which is into any kind of business is faced with 100 decisions they have to take in a day. These will be as mundane as refilling the water cooler, to as stressful as fulfilling a customers 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. Thing about the number of simple operational decisions that, if not taken properly, can destroy the experiences of customers visiting the McDonald’s stores.

Typically, operational decisions in any business are of the following types

1) Pricing – Go to any retail store and you will find customers haggling on 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 on which brand the dealer will push in the market. And hence, managers should have all information on current discount levels in the market and what discounts to be given 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 which are to be taken from time to time.

4) Collecting information – Now this is a task which 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.

Above 4 are the major operational decisions which have to be taken everyday 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, MBA’s 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 increases. Hence the business needs to hire employees, or an organization needs to hire managers to manage such operational decisions.

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