Question

Do you think the statement “management decisions must always be based on information that is objective and verifiable” is correct? Justify your answer with specific examples. 100 words)??

Answer 1

Management decisions must always be based on information that is objective and verifiable. Decision making plays a vital role in the success of any organization irrespective of its nature or size. Every business has to face countless situations on daily basis, where management have to take corrective action or decision. Each decision has the impact on the success and growth of the organization. So it’s very important to make the decision based on accurate information, Information that should not have an influence of personal feelings or interpretation. Information should be based on the facts and figures. Information based on the objective is easy to verify. And also can be used for future reference.

Example: - Most of the time company face a situation where they have to choose whether to do an activity by itself or should go for outsourcing. On the basis of subjective knowledge, it may look profitable some time to outsourcing. But if a company use activity-based costing it may find out that it is much costlier. By costing each activity company can perform that activity by itself and earn the profit. Objective information is very important to improve decision-making over time for higher profitability and greater competitive advantage. Ratio analysis, cost analysis etc. are few examples of objective information.