Question

Qualitative factors are non-financial in nature but are important for management to consider when making decisions. Reflecting on a company for which you have worked (or are otherwise familiar), describe three qualitative factors that would be important for management decision-making. Then, assess each of them in order of importance. Given your assessment, justify a situation where the qualitative factors would outweigh the quantitative results. Be specific.

Answer 1

Qualitative factors are important for management to consider when making decisions like say shut down vs continue, discontinue products, closure of division, etc

Based on my experience for the company which i worked 3 qualitative factors are listed below for management decision-making

1. Impact on Employee morale
2. Customer Service
3. Reputation of Company in the Community/Society

Companies take decisions which are in the interest of morale of the employees. For example if discontinuing a division leads to retrenchment of employees Management considers re-allocating the employees to other division. If this is not possible they may not be willing to close the division since it will affect the employee’s morale

Customer servicing is also the top priority for many firms. Companies want to service the customer to maintain the relationship for long term benefit of the organization. Hence any decision which will affect the service for customers firms may not be willing to take it

Reputation off the firm is also important in society. Hence any decision that adversely affects the reputation or image of the firm in society will be avoided while decision making

Situation:

If a manufacturing unit has to be closed and if the company is unable to give alternative employment in the other divisions of the company the manufacturing unit may not be closed even if it is unprofitable. Instead management may have to find other alternative of making it profitable by reducing the cost of production in that manufacturing unit. The morale of the employees will be safeguarded and priority for the organization even though the decision is quantitatively beneficial for the firm.