Question

Your company has realized that some managers are making rash decisions which have created negative consequences for the entire company. You have been assigned to a team responsible for training managers on good decisions based on a relevant-cost decision model. Your team has done some research and found that most management decisions can be approached using a model that asked five questions. List and discuss the five step approach in Chapter 8.

Answer 1

Since Chapter 8 isnt attached here, I will be answering this from my understanding of the situation.

Now, many companies could be facing this issue wherein mannager make very harsh decisions which end up hurting the company rather than helping them grow in size and revenue. Such bad decisions could get the company in serious trouble and could lead them to face negative consequences.

The five question model that would help management to make better decisions is as follows:

1. Is this in the best interest of the company?

Does the company benefit from this decision you are about to make. That is the main thing to consider. If thats a NO, then dont even think about proceeding with that decision.

2. Is this for satsfying personal interest?

If for any reason you feel the answer to this is YES, do not make that decision. As management, you have a duty of care towards shareholders, who have trusted you and put their money into the business so that you would make profits for them and they could enjoy dividends out of it.

3. Is there a better alternative?

This is always an important question to be asked. Is this the best option right now or do we have a better alternative available which could give better results.

4. Does it have a negative impact on any stakeholders?

This also has to be considered. All stakeholders are of extreme importance to the business. It is only with their help and support that the company can move forward. So never take decisions which could lead to hurting them.

5. Will it create revenue and hence profits for shareholders?

This is all that matters in the end. If the shareholders see a profit, they are happy. They invest money into the business so that they can earn good profits. So theres nothing that can make them more happy than seeing profits in the financial statements.

Hope this answers the question. If you liked the answer, please give an up-vote. It would be highly encouraging for me. Thank You.