Risk Management

Definition of 'Risk Management'

The process of identification, analysis and either acceptance or mitigation of uncertainty in
investment decision-making. Essentially, management occurs anytime an investor or fund
manager analyzes and attempts to quantify the potential for losses in an investment and then
takes the appropriate action (or inaction) given their investment objectives and risk tolerance.

Inadequate risk management can result in severe consequences for companies as well as
individuals..

Simply put, risk management is a two-step process –

 determining what risks exist in an investment

 and then handling those risks in a way best-suited to your investment objectives.

Risk management occurs everywhere in the financial world.

Risk management is the identification, assessment, and prioritization of risks (defined in ISO
31000 as the effect of uncertainty on objectives, whether positive or negative) followed by
coordinated and economical application of resources to minimize, monitor, and control the
probability and/or impact of unfortunate events[1] or to maximize the realization of opportunities.

Risks can come from uncertainty in financial markets, threats from project failures (at any phase
in design, development, production, or sustainment life-cycles), legal liabilities, credit risk,
accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of
uncertain or unpredictable root-cause.

Risk management aims to facilitate the exchange of information and expertise across countries
and across disciplines. Its purpose is to generate ideas and promote good practice for those
involved in the business of managing risk.

All too often assessments of risk rate crudely made and the consequences of getting things wrong
can be serious, including lost opportunities, loss of business, loss of reputation and even life.

Why Manage Risks?

There are many reasons for managing risk. Here are some:

 Saves resources: people, income, property, assets, time

 Protects public image
 Protects people from harm
 Prevents/reduces legal liability

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 Protects the environment

THE RISK MANAGEMENT PROCESS

1. Identify Potential Exposures to Loss

2. Measure Frequency and Severity
3. Examine Alternatives
4. Decide Which Alternatives to Use
5. Implement the Chosen Techniques
6. Monitor Results

Risk management is a discipline for identifying risks, assessing how serious or severe the risks
are, and determining ways to address that uncertain future with a goal of avoiding or minimizing
harm and financial losses. Risk management focuses on those events or occurrences that may
cause injury or harm to clients, assets (including employees and volunteers) and its reputation.

What is a Risk Management Plan?

A risk management plan is a way to identify risk management goals, strategies to achieve them,
measurable outcomes, as well as who will be accountable.

Generally the risk management plan is developed by a committee that includes staff and board
and adopted by the board as part of the board’s overall commitment to good governance.

Identifying and Managing Business Risks

If and when risk becomes reality, a well-prepared business can moderate the risk's impact. Profit
losses, lost time and productivity and the negative impact on customers can all be minimized.

Types of Risks

Physical Risks
Building risks are the most common type of physical risk. Fire or explosions are the most
common risk to a building.

To manage this risk, and the risk to employees, it's important to do the following:

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  Make sure all employees know the exact street address of the building to give the 911
operator in case of emergency.
 Know the location of all exits.
 Install fire alarms and smoke detectors.
 A sprinkler system will provide additional protection to the physical plant, equipment,
documents and, of course, personnel.
 Inform all employees that in the event of emergency their personal safety takes priority
over everything else. Tell them to leave the building and abandon all work-associated
documents, equipment and or products.

Hazardous material spills or accidents also occur with some regularity. Among the hazardous
materials most frequently spilled or released into the atmosphere of a workplace are: acid, gas,
toxic fumes, toxic dust or filings, and poisonous liquids or waste. Fire department hazardous
material units are prepared to handle these types of disaster. People who work with these
materials, however, should be properly equipped and trained to handle these materials safely.

A plan should be created and implemented to handle the immediate effects of these risks.
Government agencies and local fire departments may help in acquiring information to prevent
these accidents and provide advice on how to control them and minimize their damage if they
occur. (To learn more, see our Intro To Insurance Tutorial.)

Location Risks
Among the hazards facing the location of a business are nearby fires, storm damage, floods,
hurricane or tornado, earthquake and other natural disasters. Employees should be familiar with
streets leading in and out of the neighborhood on all sides of the place of business. Keep
sufficient fuel in your vehicles to drive out of and away from the neighborhood.

Human Risks
Alcoholism and drug abuse are major risks to personnel in the work force. Employees suffering
from these conditions should be urged to seek treatment, counseling and rehabilitation if
necessary. Some insurance policies may provide partial coverage for the cost of treatment.

Protecting against embezzlement, theft and fraud may be difficult, but these are crimes which
occur frequently in the workplace. A system of double signature requirements for checks and
invoice and payables verification can help prevent embezzlement and fraud. Stringent
accounting procedures may discover embezzlement or fraud. A thorough background check

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before hiring personnel can uncover previous offenses in the applicant's past. While this may not
necessarily be grounds for declining to hire an applicant, placement for the new hire in a critical
position in which money and cash equivalents are used may not be judicious.

Sickness among the work force is inevitable and is always a problem. To prevent loss of
productivity, assign and train backup personnel to handle the work of critical employees when
they are absent due to illness.

Technology Risks
Power outage is perhaps the most common of technology risks. Auxiliary gas-driven power
generators are a good back-up system to provide electrical energy for lighting and other
functions until utility power is restored. In manufacturing plants, several large auxiliary
generators can keep a factory producing until utility power is restored.

Computers may be kept up and running with high-performance back-up batteries. Power surges
may occur during a lighting storm, or randomly, so computer systems should be furnished with
surge-protection devices to avoid loss of documents and destruction of equipment. Offline and
online data back-up systems should be used to protect critical documents.

Although telephone and telecommunications failure is relatively uncommon, risk managers may
consider providing emergency-use-only company cell phones to personnel whose use of the
phone is critical to their business.

Others are:

Economic risks

Political Risks

Natural Risks

Prioritizing Risk
After the risks have been identified, they must be prioritized in accordance with your assessment
of their probability.

Establish a probability scale for purposes of risk assessment. For example, risks may be:

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 1. Very likely to occur
2. Some chance of occurrence
3. Small chance of occurrence
4. Very little chance of occurrence

Other risks must be prioritized and managed in accordance to their probability of

occurring. Actuarial tables – statistical analysis of the probability of any risk occurring, and the
potential financial damage ensuing from the occurrence of those risks – may be accessed online
and can provide guidance in prioritizing risk.

Insurance is a principle safeguard in managing risk, and many risks are insurable. Fire insurance
is a necessity for any business that occupies a physical space, whether owned outright or rented,
and should be a top priority. Product liability insurance, as an obvious example, is not necessary
in a service business.

Some risks are inarguably high priority, such as the risk of fraud or embezzlement if employees
handle money or perform accounting duties in accounts payable and receivable. Specialized
insurance companies will underwrite a cash bond to provide financial coverage in the event of
embezzlement, theft or fraud.

When insuring against potential risks, never assume a best-case scenario. Even if employees
have worked for years with no problems and their service has been exemplary, insurance against
employee error may be a necessity. The extent of insurance coverage against injury will depend
on the nature of your business. A heavy manufacturing plant will, of course, require more
extensive coverage for employees. Product liability insurance is also a necessity.

If a business relies heavily on computerized data – customer lists and accounting data, for
example – exterior back up and insurance coverage are mandatory.

Finally, hiring a risk management consultant may be a prudent step in the prevention and
management of risks. (To learn more, read Insurance Coverage: A Business Necessity.)

Prevention
The best risk insurance is prevention. Preventing the many risks from occurring in your business
is best achieved through

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  employee training,
 background checks,
 safety checks,
 equipment maintenance,
 and maintenance of the physical premises.
 A single, accountable staff member with managerial authority should be appointed to
handle risk management responsibilities. A risk management committee may also be
formed with members assigned specific tasks, with a requirement to report to the risk
manager.

The risk manager with the committee should formulate plans for emergency situations
such as:

 Fire
 Explosion
 Hazardous materials accidents or the occurrence of other emergencies

Employees must know

 what to do,
 where to exit the building or office space.
 A plan for the safety inspection of the physical premises and equipment should be
developed and implemented regularly,
 with the training and education of personnel, when necessary.
 A periodic, stringent review of all potential risks should be conducted.

Any problems should be immediately addressed. Insurance coverage should also be periodically
reviewed and upgraded or downgraded as necessity requires.

Types of Business Risks

Business risks are of a diverse nature and arise due to innumerable factors. These risks may be
broadly classified into two types, depending upon their place of origin.

 Internal Risks are those risks which arise from the events taking place within the business
enterprise.
 Such risks arise during the ordinary course of a business.
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 These risks can be forecasted and the probability of their occurrence can be determined.
Hence, they can be controlled by the entrepreneur to an appreciable extent.

The various internal factors giving rise to such risks are:-

 Human factors are an important cause of internal risks. They may result from
strikes and lock-outs by trade unions; negligence and dishonesty of an employee;
accidents or deaths in the industry; incompetence of the manager or other
important people in the organization, etc. Also, failure of suppliers to supply the
materials or goods on time or default in payment by debtors may adversely affect
the business enterprise.
 Technological factors are the unforeseen changes in the techniques of production
or distribution. They may result in technological obsolescence and other business
risks. For example, if there is some technological advancement which results in
products of higher quality, then a firm which is using the traditional technique of
production might face the risk of losing the market for its inferior quality product.
 Physical factors are the factors which result in loss or damage to the property of
the firm. They include the failure of machinery and equipment used in business;
fire or theft in the industry; damages in transit of goods, etc. It also includes losses
to the firm arising from the compensation paid by the firm to the third parties on
account of intentional or unintentional damages caused to them.

 External risks are those risks which arise due to the events occurring outside the business
organization. Such events are generally beyond the control of an entrepreneur. Hence, the
resulting risks cannot be forecasted and the probability of their occurrence cannot be
determined with accuracy.

The various external factors which may give rise to such risks are :-

 Economic factors are the most important causes of external risks. They result
from the changes in the prevailing market conditions. They may be in the form of
changes in demand for the product, price fluctuations, changes in tastes and
preferences of the consumers and changes in income, output or trade cycles. The
conditions like increased competition for the product, inflationary tendency in the
economy, rising unemployment as well as the fluctuations in world economy may
also adversely affect the business enterprise. Such risks which are caused by
changes in the economy are known as 'dynamic risks'. These risks are generally
less predictable because they do not appear at regular intervals. Also, such risks
may not necessarily result in losses to the firm because they may also contain an
element of gain for the firm. For instance, due to market fluctuations, awell-
known product of a firm may either lose its demand or may occupy a larger

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 market share.
 Natural factors are the unforeseen natural calamities over which an entrepreneur
has very little or no control. They result from events like earthquake, flood,
famine, cyclone, lightening, tornado, etc. Such events may cause loss of life and
property to the firm or they may spoil its goods. For example, Gujarat earthquake
caused irreparable damage not only to the business enterprises but also adversely
affected the whole economy of the State.
 Political factors have an important influence on the functioning of a business,
both in the long and short term. They result from political changes in a country
like fall or change in the Government, communal violence or riots in the country,
civil war as well as hostilities with the neighbouring countries. Besides, changes
in Government policies and regulations may also affect the profitability and
position of an enterprise. For instance, changes in industrial and Trade
policy annual announcement of the budget amendments to various legislations,
etc. may enhance or reduce the profits of a business enterprise.

Thus, business risk takes a variety of forms.

 In order to face such risks successfully, every businessman should understand the nature
and causes of these risks as well as the various measures which must be taken in order to
minimize them.

GOAL SETTING
Goal setting involves establishing specific, measurable, achievable, realistic and time-
targeted (S.M.A.R.T ) goals. Work on the theory of goal-setting suggests that an effective tool for making
progress is to ensure that participants in a group with a common goal are clearly aware of what is
expected from them.

On a personal level, setting goals helps people work towards their own objectives. Goal setting features as
a major component of personal development literature.

It is considered an “open” theory, so as new discoveries are made it is modified. Studies have shown that
specific and ambitious goals lead to a higher level of performance than easy or general goals. As long as

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the individual accepts the goal, has the ability to attain it, and does not have conflicting goals, there is a
positive linear relationship between goal difficulty and task performance.

Goals are a form of motivation that sets the standard for self-satisfaction with performance. [1] Achieving
the goal one has set for oneself is a measure of success, and being able to meet job challenges is a way
one measures success in the workplace. It has been said[that "Goal setting capitalizes on the human brain's
amazing powers: Our brains are problem-solving, goal-achieving machines."
Goals that are deemed difficult to achieve and specific tend to increase performance more than goals that
are not.[3] A goal can become more specific through quantification or enumeration (should be
measurable), such as by demanding "...increase productivity by 50%," or by defining certain tasks that
must be completed.
Setting goals affects outcomes in four ways

1. Choice: goals narrow attention and direct efforts to goal-relevant activities, and away from
perceived undesirable and goal-irrelevant actions.
2. Effort: goals can lead to more effort; for example, if one typically produces 4 widgets an hour,
and has the goal of producing 6, one may work more intensely towards the goal than one would
otherwise.
3. Persistence: someone becomes more prone to work through setbacks if pursuing a goal.
4. Cognition: goals can lead individuals to develop and change their behavior.

Goal setting in business

In business, goal setting encourages participants to put in substantial effort. Also, because every member
has defined expectations for their role, little room is left for inadequate, marginal effort to go unnoticed.
Managers cannot constantly drive motivation, or keep track of an employee’s work on a continuous basis.
Goals are therefore an important tool for managers, since goals have the ability to function as a self-
regulatory mechanism that helps employees prioritize tasks.[ Also Locke and Latham (2002)
The four mechanisms through which goal setting can affect individual performance are:

1. Goals focus attention toward goal-relevant activities and away from goal-irrelevant activities.
2. Goals serve as an energizer: Higher goals induce greater effort, while low goals induce lesser
effort.
3. Goals affect persistence; constraints with regard to resources affect work pace.
4. Goals activate cognitive knowledge and strategies that help employees cope with the situation at
hand
Goal commitment[
People perform better when they are committed to achieving certain goals. Through an understanding of
the effect of goal setting on individual performance, organizations are able to use goal setting to benefit

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organizational performance. Locke and Latham have indicated three moderators that indicate goal setting
success:[7]

1. The importance of the expected outcomes of goal attainment, and;

2. Self-efficacy – one's belief that they are able to achieve the goals, and;
3. Commitment to others – promises or engagements to others can strongly improve commitment.

Goal–performance relationship
Locke et al. (1981) examined the behavioral effects of goal-setting, concluding that 90% of laboratory
and field studies involving specific and challenging goals led to higher performance than did easy or no
goals.[8]
While some managers[believe it is sufficient to urge employees to ‘do their best,’ Locke and Latham have
a contradicting view on this. The authors state that people who are told to ‘do their best’ don't. ‘Doing
your best’ has no external referent, which makes it useless in eliciting specific behavior. To elicit some
specific form of behavior from others, it is important that this person has a clear view of what is expected
from him/her. A goal is thereby of vital importance because it facilitates an individual in focusing their
efforts in a specified direction. In other words, goals canalize behavior (Cummings & Worley p. 368).
[
However, when goals are established at a management level and thereafter solely promulgated from the
top, employee motivation with regard to achieving these goals is rather suppressed (Locke & Latham,
2002 p. 705).[To increase motivation, employees not only must be allowed to participate in the goal
setting process, but the goals must be challenging as well. (Cummings & Worley p. 369)[

Goal setting and feedback

Without proper feedback channels it is impossible for employees to adapt or adjust to the required
behavior. Keep track of performance to allow employees to see how effective they have been in attaining
their goals. [9] Goal setting and feedback go hand in hand. Without feedback, goal setting is unlikely to
work. Providing feedback on short-term objectives helps to sustain motivation and commitment to a goal.
Feedback should be provided on the strategies followed to achieve the goals and the final outcomes
achieved, as well. Feedback on strategies used to obtain goals is very important, especially for complex
work, because challenging goals put focus on outcomes rather than on performance strategies, so they
impair performance. Properly-delivered feedback is also very essential, and the following hints may help
for providing a good feedback:

 Create a positive context for feedback.

 Use constructive and positive language.
 Focus on behaviors and strategies.
 Tailor feedback to the needs of the individual worker.
 Make feedback a two-way communication process.
Advances in technology can facilitate providing feedback. Systems analysts have designed computer
programs that track goals for numerous members of an organization. Such computer systems may
maintain every employee’s goals, as well as their deadlines. Separate methods may check the employee’s

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 progress on a regular basis, and other systems may require perceived slackers to explain how they intend
to improve.
More difficult goals require more cognitive strategies and well-developed skills. The more difficult the
tasks, the smaller the group of people who possess the necessary skills and strategies. From an
organizational perspective, it is thereby more difficult to successfully attain more difficult goals, since
resources become more scarce.

Facts About Goal Setting

These practical tips on goal setting can help make it easier to set and reach goals:

1. Specific, realistic goals work best. When it comes to making a change, the people who succeed are
those who set realistic, specific goals. "I'm going to recycle all my plastic bottles, soda cans, and
magazines" is a much more doable goal than "I'm going to do more for the environment." And that
makes it easier to stick with.
2. It takes time for a change to become an established habit. It will probably take a couple of months
before any changes — like getting up half an hour early to exercise — become a routine part of your
life. That's because your brain needs time to get used to the idea that this new thing you're doing is
part of your regular routine.
3. Repeating a goal makes it stick. Say your goal out loud each morning to remind yourself of what
you want and what you're working for. (Writing it down works too.) Every time you remind yourself
of your goal, you're training your brain to make it happen.
4. Pleasing other people doesn't work. The key to making any change is to find the desire within
yourself — you have to do it because you want it, not because a girlfriend, boyfriend, coach, parent, or
someone else wants you to. It will be harder to stay on track and motivated if you're doing something
out of obligation to another person.
5. Roadblocks don't mean failure. Slip-ups are actually part of the learning process as you retrain your
brain into a new way of thinking. It may take a few tries to reach a goal. But that's OK — it's normal
to mess up or give up a few times when trying to make a change. So remember that everyone slips up
and don't beat yourself up about it. Just remind yourself to get back on track.

Your vision defines your ideal life and identifies the goals you'll need to get there. Through goal setting,
you get down to the nitty-gritty of what you need to do - and when you need to do it by - to create your
ideal life.
Your vision:
 provides focus
 helps you discover your personal path
Your goals:
 inspire you to do the work

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 excite and even scare you
 are specific, measurable and written in the present tense

The Importance of Setting Goals for a Business

by Matt McKay, Demand Media

Successful companies set goals. Without them, they have no defined purpose and nothing to strive for;
consequently, they stagnate and struggle for meaningful accomplishments. Goals are steppingstones to an
end result. They must be present in every business plan and become a regular part of ongoing business
operations.

What are Goals?

Goals are resolutions to achieve a desired result. Whether short or long-term, they provide a clear
understanding of what the company is striving to accomplish. Setting short-term goals to reach related
long-term goals is a key to success for most any business. Thinking of short-term goals as "stops along
the way" to large goals can compartmentalize processes without losing sight of the big picture. Having
goals gives everyday tasks more meaning and clarifies the reasoning behind company decisions.
Goals Versus Wishes
Separate statements from goals. "My company will make money this quarter" is a statement, not a goal.
To turn statements into goals, businesses must follow proven goal-setting procedures; otherwise, goals are
merely unattainable wishes.

S.M.A.R.T. Goals

One proven goal-setting procedure is called S.M.A.R.T.: Specific, Measurable, Attainable, Realistic and
Time sensitive. Goals must also be written, and a plan set forth that outlines probable methods of
attainment. Modify goals along the way, but never abandon them unless absolutely necessary. Regularly
monitoring goals and producing status reports is helpful in establishing future goals.

Team Effort

Set goals for individuals, departments or the business as a whole. Consider publicizing the goals for the
latter two within the company. This can result in a team effort, if properly presented, and employees may
feel a sense of responsibility and camaraderie. This can help boost morale and aid in bringing goals to
fruition. Input from employees during the goal setting and implementation processes can also help keep
goals realistic and attainable.

Set Goals Always

Goal setting is not a one-time event when formulating your business plan, but an ongoing process.
Markets change and both the economy and sales fluctuate, so the savvy business owner must take

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advantage of every situation. Even small goals set in the middle of a crisis can have a positive impact
when things improve. When your business is flourishing, goals help maintain or increase the good times,
and can act as a safeguard during inevitable slumps.

Set Goals and Objectives in Your Business Plan

Well-chosen goals and objectives point a new business plan in the right direction and keep
anestablished company on the right track. Just think about what football would be without end zones or
what the Indianapolis 500 would be without a finish line.
 Goals establish where you intend to go and tell you when you get there. They help improve your
overall effectiveness as a company — whether you want to increase your share of the market, for
example, or improve your customer service. The more carefully you define your goals, the more
likely you are to do the right things and achieve what you wanted to accomplish in the first place.
 Objectives are the specific steps you and your company need to take in order to reach each of your
goals. They specify what you must do — and when.
Think of goals and objectives this way:
 Goals tell you where you want to go; objectives tell you exactly how to get there.
 Goals can increase your effectiveness; objectives back your goals and make you more efficient.
 Goals are typically described in words; objectives often come with numbers and specific dates.
For example, suppose that your goal is to double the number of people using your Web-conferencing
service. Your objectives may be as follows:
 Gain awareness by placing print ads in four regional markets and by airing radio ads in two major
markets (by June 10)
 Attract first-time customers by offering an online giveaway of $1,000 (by June 1)
 Cultivate prospects by implementing a permission-based weekly e-mail to 2,500 targeted contacts
(by July 10)
 Convert 10 percent of prospects to clients, using e-mail reminders (beginning July 25)
Together, goals and objectives form the road map for your company’s future. Without them, you risk
making wrong turns and wasting precious energy.
When establishing goals and objectives, try to involve everyone who will have the responsibility of
achieving those goals and objectives after you lay them out.
Select the five goals that you think are absolutely, positively essential to your business success. (If you
come up with only four, don’t worry. If you can’t get away with fewer than six or seven, that’s okay, too.
Just be sure you establish a list of goals long enough to drive your success, but don’t overwhelm your
ability to focus on each one.)
After you decide on your list, fine-tune each goal, using these guidelines:
 Keep each goal clear and simple.

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 Be specific.
 Be realistic.
 Don’t be afraid to push yourself.
 Make sure that your goals are in sync with your mission.

HOW TO SET BUSINESS GOALS

Regardless of whether you’re a freelancer, small to medium business, or large scale organization, you
need to know how to set business goals. Business goals allow your organization to set accountability for
project work, and also provide a framework for future growth and operational performance as time goes
on.
When setting business goals, you’ll need to ensure that you set both long term and short term goals. These
goals will be very different in nature, but need to be planned at the same time so you know that your short
term goals are contributing strongly to your longer term business objectives.
To help set your business goals, we’ve created this guide to assist you in creating a meaningful structure
which you can use to roadmap your business and begin the first steps to reaching your professional and
financial targets.

Determine your long term goals first

You have to have an idea of where you want to go before you can decide on how you’re going to get there
right? So by firstly determining your long term business goals, you can work backwards and decide on
whether or not those long term goals are a truly viable option for your business, or need some adjustment
to ensure they’re going to be worthwhile and achievable options. By setting long term business goals,
you’re helping to:
 Create a significantly more compelling vision of the business which can be adhered to by all.

 Provide direction and a greater sense of purpose for your staff and management team.
 Gain a better understanding of potential roadblocks.
 Provide an understanding of the long term positive impact hoped to be garnered by implementing
the many parts of your long term business goals.
 Provide a glimpse of the “bigger picture” giving you something to work towards.
Long term goals are all about building success over time and driving your business in a sustainable
direction; hence you need to have some foresight when planning these. When you define your long term
goals, you are now stating that, “by a certain date in time, I will achieve a certain something”, as oppose
to simply saying “someday it would be nice to achieve a certain something”. This key difference ensures
accountability on yours and your organizations behalf, and also puts a deadline on what you as an
organization are really trying to achieve. Regardless of whether you’re a freelancer, SME, or large scale
operation, by committing to your long term goals in writing and making a plan, you’re significantly more
likely to achieve them.
Identifying long term business goals
When identifying a long term business goal, you need to assess which goals will are likely to have the
most positive effect on your life and future successes. This may be a goal which is achievable in 1 years’,
2 years’, or even 5 years’ time, but you need to keep in mind that if you are going to commit to trying to
achieve a goal of this nature, it needs to be something that is realistic and will have a lasting measurable
effect.

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Another factor to consider when determining long term business goals is whether or not you have the
resources, stamina and time to achieve that goal. There is nothing worse than setting a goal only to
discover that external factors are likely to affect your progress and you have to abandon you plans part
way through your journey. Ensure you “check yourself”, before you get “too excited”. This can save a lot
of time and money and put you in a far better position to grow your business. This may mean setting a
more achievable or smaller scale long term goal, which is far better than setting a broad and lofty goal
which never gets realized.
Break your goals up into smaller pieces
If you’ve decided on a long term goal for your business, and you feel it is achievable based on your
available resources, budget, and the goal makes sense for your organization, then it’s time to determine
the best way to break up your goal into smaller more manageable pieces.
For example, if you were wanting to build a new company website which has an e-commerce component
because you want to start selling goods online, purely because of the logistics involved in such a
transition, you’re most likely going to find that you’ll need to consider process changes within your
organization, changes to the technical knowledge you either employ in house or externally, and changes
to how you interact with your customer base. Even though your goal may be to sell a certain percentage
of your goods online via your website channel, you need to realize that there are many steps to the
process, and many considerations beyond that of the technical project implementation that will need to be
managed constantly that affect you realizing your long term goal.
One method of breaking up longer term goals into smaller pieces is to undertake a basic analysis of each
project element. To do this, you might firstly start by identifying each as a smaller goal, then ask yourself:
 Is this goal necessary, and if so, where does it fit into the project timeline?
 How much budget will this goal take to complete?
 Are other project goals reliant on this goal being completed?
 What actions are required to complete this goal?
 Are there external resources required, and if so, is knowledge transfer required?
 What are the concrete numbers around this goal? What level does this goal need to operate at to
achieve the desired outcome? What measurable figures matter?
 When will the goal need to be completed by?

Discuss your goals with your team

People love to be ‘part of something great’. They like to feel like their work is valued, and that they are
appreciated for their contribution. One way to achieve this is to openly discuss with your team what your
goals are for the project, both long term and short term, why these goals matter to the organization, and
how it is going to benefit the organization as a whole if these goals are achieved. Often companies will
leave their employees in the dark with regards to a lot of the work they do, but if employees can see why
their contribution matters, and how it is contributing to a larger overall goal, this can really help to
motivate them and their co-workers to become more productive and engaged in their work.
Are your goals truly measurable?
Goals which are truly measurable are the best kind, because they leave no room for vanity successes.
Goals which can be assessed plain and simple as to their effectiveness are the most useful to an
organization, take the least amount of time to plan, and can be restructured with the greatest amount of
ease following a negative result.

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Often companies will set goals or project milestones which complement their vision of success, as oppose
to actually complementing the organizations goals and bottom line. This is a really crucial element to be
aware of when setting business goals, because goals should never be virtual or self-indulgent. Don’t
waste your time with activities that don’t contribute to your organization. Always have an outcome in
mind when setting business goals. Set goals you can measure the success of following implementation
and your projects will be far better off, and your long term goals will contribute much more positively to
your organization and surprisingly appear far more obtainable.
What programs are you going to use to track your goals?
Project management tools are essential tools in the fight to achieving both long term and short term
business goals. Why, because they put everything into context, they don’t lie (provided you’re filling
them out), and they keep track of everything you can’t possibly keep track of on your own.
Quite often, project managers will use a project management tool as their home base for all things related
to a project. Although data related to the project may be coming in from different sources such as Google
Analytics, surveys, or budgetary reports, it can be all tracked from one central location. Coming from
experience and having worked on some very lengthy projects, this is a great approach. Finding a project
management tool that you’re comfortable using and interfaces well with external data sources and is
mobile compliant, is an invaluable tool for the busy professional.
What if I don’t reach my goals on time or to budget, or my smaller goals aren’t
working for me?
When you set business goals, and then for a whatever reason things all go horribly wrong and your goals
are not met; this is the worst possible nightmare for any project manager. This of course can happen for a
number of different reasons, but at the end of the day, these types of problems generally occur when not
enough careful analysis of both long term and short term goals were put in place prior to the instigation of
a project.
As you become more experienced, issues such as these do tend to be less frequent. Knowing one’s own
limits, combined with the plausibility of what a team can achieve given their expertise and experience can
all help to limit projects not reaching their goals. However in the event this does happen, the best
approach is to isolate the issue at hand and look into why this issue occurred. Most likely your problem
will be limited to only to a handful of project areas (or just one if you’re lucky), and you can perform
some analysis on where in the process of planning, scoping or implementation things went astray, and fix
the issues. This way, the project can continue without a major disruption.

Set business goals but ensure a process of peer review

When setting either long term or short term business goals, it’s best to get someone else to take a look at
things for you. Even if the person is more junior than yourself, a second set of eyes is always a good
thing. Often times we can get too close to projects, or ask too much of ourselves in terms of our expertise
to implement a full project plan. By either having a colleagues look over your work, challenge your ideas,
or have a subject matter expert either internally or externally consult on a particular project element prior
to sign off, you can significantly decrease the likelihood of project scope creep or inefficiencies in your
project goals or planning occurring.

If your plan needs to change, remember your budget

Sometimes when we set goals, something better, cheaper or more suitable comes along and we need to
reassess our strategy. However after looking things over, if you do decide that a project goal or
component is to be replaced by something else, then you need to assess the overall long term budgetary
effects of such a change. At the end of the day, business is about making money, and as great an idea as
something may appear, you need to ensure you don’t treat it with rose coloured glasses. Look at how
much budget you’ve already spent on a particular goal, how much a change request will take, and whether
or not this will translate into a long term saving. If the answer is yes, unfortunately you’ll have to take a

16
short term hit and move on, but if not, just because everyone else is doing it, doesn’t make it right for
your business, so look at things from all angles.
Conclusion
If you’re running a business of any kind, learning how to set business goals and stick to them is vital to
your success. Proper, methodical, business evaluation of all goals is a crucial step business owners should
take. Planning and peer reviews, combined with involving stakeholders in your business is far more likely
to produce a strong and steadfast result as oppose to fly by the seat of your pants tactics. Set goals which
are achievable and don’t hurt your business, by setting goals which are too much to handle. If you can
support a certain level of growth but no more, be happy with that, and aim for more next time when
you’re in a better position to do so. Most importantly, set a number of smaller project goals which make
up larger more lofty goals. This will help you to stay focused, and review your work as time goes on.

Important Considerations When Setting Goals

Only 55% of goal setters actually achieve their goals. Is there any way to increase our chances of
achieving that set goal? In this article, we will take a look what you can do to take your chance of
achieving a goal to 70-80% or more.

There are several key things that you can do to increase your chances of success. I like to do that,
especially if I am setting a goal which is likely to take a decade. After all, you don't want to leave this
goal to chance, we want certainty.

To create certainty, you have to go to the root of that goal. Why are you selecting this goal? You will find
that people will set a goal of becoming a millionaire. The motivation was television or some external
desire, and this means the goal likely will not be achieved.

To achieve a goal requires that you take the time to consider why you want the goal achieved in your life.
A person who is homeless or very poor with no money is likely to achieve huge success. They promise
themselves to change, and they do. Some of the most successful people have literally gone from rags to
riches.

Another way to achieve success with your goal setting is to write it down. Simply writing a goal down
makes it one which is more likely to be achieved. We are talking about a 1% chance to a 55% chance,
simply by writing your goal down.

Time is an important factor. The time you spend looking at your goal is crucial. A goal looked at once
and never looked at again is unlikely to be achieved, unless there is a very strong desire, deep down inside
you, to achieve that goal.

Some goal setters will try to write lots of goals, however, this is not best. The best way is by sticking to 1
to 3 goals at max. And if you are new to goal setting, and don't know much about how to goal set, then
stick with 1 goal, until you learn the ins and outs of goal setting.

Clarity is another important aspect of goal setting. Often people will set goals to achieve a goal and leave
it very loose in terms. It is not properly formulated and hard to achieve. Your mind simply can't
understand what you want.

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However, simply writing a goal down does not do much difference to the achievement. There is more to
do with setting goals. If you truly want this goal manifest in your life, then the most important way to go
about writing your goal is to be clear. So many people will wish, so many people will say I want to be
rich, I want to be healthy, I want a Yacht, but so few will do the most important step - formulate, clarify,
and write it down.

Goal Setting Activity - Discover Goal Setting Activity Secrets

Are you one of the many people who are still confused and totally clueless about reaching the goals in
their lives? Do you want to know more information on how to discover goal setting activity secrets so that
you would have a better understanding on how can you possibly achieve your goals? Don't worry because
you still have the chance to do better things in your life and in the end you will surely succeed. Here are
some tips on how you can discover goal setting activity secrets that will surely bring you on top of your
life:

Tip # 1: Research Is A Must

If you want to know more information about goal setting, then the best way to look for great and very
helpful information would be the internet. Make sure that you research online and list the things that you
would get from research so that you will have your own list of important things to remember when it
comes to reaching your goals.

Tip # 2: Take Down Notes

As I have mentioned from tip # 1, it's really going to help you big time if you would take notes of the
things that you will get through research. Example, you will have the list on how could you possibly
discover goal setting activity secrets that will change your life forever.

Tip # 3: Do Whatever It Takes

If you would be able to know more information about the guaranteed ways and secrets on how to
successful achieve your goals then it's really going to help you a lot. However, you still need to keep in
mind that knowledge about reaching your goals isn't the only thing that you need that will make you
successful, what you also need is determination to pursue everything that you need to do in order to reach
your dreams.

Keep these tips in mind and it's a guarantee that you will have a better clue on what you're going to do in
order to achieve your goals and make your dreams into reality.

Management Goal Setting - Goal Setting Achievement

Management goal setting is very important in an organization's continued success and direction. In
operating a particular multinational organization or a small business, realistic goal setting is very crucial
in order for it to be successful. Setting business goals does not have to be a difficult and complicated
process.

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Realistic goal setting entails the assurance that your goals are reachable within your resources and
abilities. Attainable goals would mean that you will be able to make quick adjustments in cases of
problems and unexpected occurrences. Identify your short term goals and make it move you towards
achieving your long term goal. Short term goals are definitely important since it serve as stepping stones
to achieving long term goals.

Your goals should be measurable. It will be a lot easier to identify if you are making progress. So for
example, you are in a sales business, and your goal is to make fifteen sales a month, then it will be very
easy for you to do all the means possible in order for you to be able to track your progress towards
meeting that sales goal.

Do not take for granted the importance of writing down your goals. Writing down your goals strengthens
your commitment to it. Give your goals the attention it deserves. It is very critical that goals get daily
attention, especially if you want to reach it. If your goal is something that you would really enjoy
accomplishing, then thinking about it on a daily basis should be completely natural.

Keep in mind that thought and action plays a very important role in being successful. By being fully
aware of your goals, you will be able to make the necessary steps to take, every move to make and
placing all your effort in the right areas. You have to follow your intuition, your inner guidance and it will
lead you to take the right action every time.

Tips For Goal Setting - Goal Setting Strategy

Tips for goal setting are very helpful; they are easy to learn and apply in your everyday chores. And it is
said that goal setting tips are one of the important habits that successful people follow to help them
achieve what they want in life, therefore become happy.

Goal setting is simply having a clear plan and a future vision of where you want to be somewhere in the
future, in order to set goals or have a plan you must first know where you want to be in the future, you
must have some kind of a dream, something that you really want.

Take some time to ask yourself about the reason behind your goal. Realizing the importance of set goals
is what separates successful people from those who are frustrated and struggling along. If you are
struggling to find direction then learn to set goals. There are a lot of informative materials where you can
read a lot of tips regarding goal setting. These tips have helped hundreds of others and no doubt they can
help you, too.

Goals are valuable tools. They'll take you to places you've only dreamed of. They'll help you achieve your
life's dreams. They'll give you self-confidence. And most of all, they'll motivate you to keep on. Like all
tools, proper usage is important to achieving what you set out to do. Proper usage of goals determines
their effectiveness. There are a few things to consider before setting your own goals. First of all, set your
goals in a positive manner. They should make you smile rather than cringe.

Tips on setting goals can be crucial in helping you move toward career success. Often people fail to
achieve their dreams, not for lack of hard work and motivation, but simply because they failed to define
their dreams and goals in a manner that allowed them to effectively move toward their goals.

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Eight Steps To Successful Goal Setting

You and I know no one can be totally successful. But continual failure in personal goal planning on or off
the PC, will inevitably make you more and more frustrated and disappointed.

Step 1: The first important thing in goal setting is do something as opposed to nothing, and get started
NOW. By placing time limits on your goals, you motivate yourself to get started and allowing yourself
the best chance to succeed. Just remember that you can adjust your goal setting time frames whenever
you see fit.

Step 2: Decide what your goals are in any situation, are they worthwhile, and if they are achievable. Don't
be afraid to dream a little, and rest assured the more practice at personal goal planning you get, the bigger
the likelihood of you reaching all the goals you set. Then write down your short and long term goals,
whether they are on or off the PC.

Step 3: Most of us fail to in setting and achieving goals because we think we 'don't have enough time'. So
in the end, the major part of effective goal setting comes down to how effective your time management is.
But 'time management' means actually we must be able to balance our time in the best way possible in
order to achieve our goals. Check how time passes with reminders, audible and visible alarms and pop
ups - anything to keep you productive and not just daydreaming.

Step 4: Break each goal down into several smaller goals which will make this process easier. In each step
evaluated the obstacles that may stop you moving on and decide how they can be overcome or avoided.

Step 5: Take some time for quality research and education. Set performance goals and time limits here
too! Surf, read, chat - but keep your enquiries to the point. Keep understandable notes throughout,
including links and your own relevant thoughts as they come.

Step 6: No matter what you do, don’t expect to eliminate every trace of uncertainty from goal setting
activity. It isn't cast in stone.. A little stress should fire up your determination and flexibility, which you
need particularly in the ever changing Internet universe! Keep moving!

Step 7: Evaluate your progress as often as needed. If this is a big goal it may take years, but stay
motivated! Review your progress daily, weekly, or at any other interval you feel comfortable with, but as
often as you need to determine if your program is working and moving forward. If you're not progressing
on a particular goal, you may have to re-evaluate your approach and make changes as necessary

Step 8: Another personal goal plan has succeeded! On to the next one...

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OK, you may struggle a little at first. Maybe once or twice, fall back into your old sloppy ways. But
remember...people who are able to use goal setting effectively concentrate and focus better. They show
more self-confidence, suffer less from stress and anxiety, perform better at whatever they attempt, and are
happier and more satisfied with life.

SMART Goals

S = Specific
M = Measurable
A = Achievable
R = Relevant
T = Time-bound

The 5 Steps to Setting SMART Business Goals

What are Smart Goals?

S.M.A.R.T. is an acronym for the 5 steps of specific, measurable, achievable, relevant, and time-based
goals.

It’s a simple tool used by businesses to go beyond the realm of fuzzy goal-setting into an actionable plan
for results.
Specific: Great goals are well-defined and focused. “Obtain 2 new billion dollar corporate clients in the
Boston property insurance market” is more meaningful to mobilize your team than “Get more business.”
Ryan Blair, The Goals Guy eloquently states, “Focus creates a powerful force: goal power. The moment
you focus on a goal, your goal becomes a magnet, pulling you and your resources toward it. The more
focused your energies, the more power you generate."

Measurable: A goal without a measurable outcome is like a sports competition without a scoreboard or
scorekeeper. Numbers are an essential part of business. Put concrete numbers in your goals to know if
you’re on track. A goal white board posted in your office can help as a daily reminder to keep yourself
and your employee focused on the targeted results you want to attain.

Attainable: Far too often, small businesses can set goals beyond reach. No one has ever built a billion
dollar business overnight. Venture capitalists and angel investors discard countless business plans of
companies with outlandish goals. Dream big and aim for the stars but keep one foot firmly based in
reality. Check with your industry association to get a handle on realistic growth in your industry to set
smart goals.

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Relevant: Achievable business goals are based on the current conditions and realities of the business
climate. You may desire to have your best year in business or increase revenue by 50%, but if a recession
is looming and 3 new competitors opened in your market, then your goals aren’t relevant to the realities
of the market.

Time-Based: Business goals and objectives just don’t get done when there's no time frame tied to the
goal-setting process. Whether your business goal is to increase revenue by 20% or find 5 new clients,
choose a time-frame to accomplish your goal.

it.

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EVALUATING BUSINESS GOALS (compare with
above GOAL SETTING)
OBJECTIVE: At the end of this topic, the trainee will be able to identify and evaluate
business goals.

IMPORTANCE

Entrepreneurs will be able to find out the extent to which the business is making progress
in accordance to the set goals. They will be able to identify any deviations, the cause, and
initiate corrective measures.

KEY POINTS

1. Short-term goals: indicate what has to be achieved within the current year for the
purpose of achieving the long term goals. It also indicates how this has to be
achieved.

2. Long-term goals: stated in broad terms, what has to be achieved over a period
beyond one year doesn’t show how this has to be done, but give general direction of
a firm. They make the corner stone of the business. They could be expressed in
terms of service standards, sales volume, profit or any other criteria the
entrepreneur may choose.

3. Planned Goals: intended to be achieved over a given period of time.

4. Actual goals: achieved over a stated period.

5. Deviation: over- or underachievement of goals.

6. Internal causes of Deviations: waste, finance, production and marketing.

7. External causes of deviations: prices, government regulations, natural factors,

industrial problems, distribution problems and social amenities.

8. Adjustment to goals: redefinition of goals to fit the changing circumstances.

9. Goal evaluation: measure of how well the stated long-term and short terms goals
have been met. Where, for example, sales are used as standard of measure
(evaluating assistant) the actual sales figures are compared to planned and
appropriate conclusions drawn.

10. Causes of goal deviation: factors that may affect the achievement of goals. These
may be factors internal to the business e.g prices, government regulations etc.

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24
 ESTABLISHING BUSINESS GOALS
Planning is essential for any small enterprise particularly those with growth aspirations.
Many planning techniques developed for large companies are simply impractical for small
enterprises: they are unnecessarily elaborate and too time consuming and expensive. Yet, if
the small enterprise (SE) is to grow beyond the survival stage then planning and
establishment of goals is needed, in addition to other necessities for growth.

WHY ESTABLISH GOALS?

Goals are established for the following reasons:

1. Helping the entrepreneur to come up with a better method by considering

alternatives.

2. Keeping the entrepreneur in a future oriented frame of mind. This thinking helps
are to anticipate, and thus be more alert for and responsive to problems,
opportunities and changes that may affect the business.

3. Better understanding of the business by looking at the whole.

4. Developing motivation by having a clear sense of direction and target.

5. Help to develop a results orientation as goals must be specific time phased and
measurable.

6. Provides a tool for evaluating performance and changing appropriate direction.

7. Helps the entrepreneurs to manage the risks and uncertainties of the future.

THE MBO PROGRAMME:

In management by objectives (MBO), results are more important than activities. With MBO,
the job is viewed in terms of what it should achieve. Activity is never the essential element.
It is only an intermediate step leading to the desired result.

What business am I in?

In making long range plans, the first question the entrepreneur ought to think about is
“what business am I in?” is the definition the entrepreneur has of the business right for
today’s market?

25
Are there emerging customer needs that will require a changed definition of your business
next year?

For example, one entrepreneurs business was making metal trash cans. When sales began
to fall off, the owner was forced to re-examine the business. To regain lost sales and
continue to grow, the owner redefined the product as metal containers and developed a
marketing plan for the product.

How the business is viewed will provide the frame work for planning with respect to
markets, product development, buildings and equipment, financial needs, and staff size.

Long-range objectives for the business will be the corner stone of the enterprise. At a
minimum, they must be clearly communicated to all personnel. For a truly vital
programme, however, personnel should have a part in formulating these long range goals.
Entrepreneurs will base their short range goals on these objectives, they will be more
committed to achieving them.

THE MBO PROGRAMME

Management by objectives may be used in all kinds of enterprises. But not everyone has
had the same degree of success in using this concept. From examining those MBO
programmes that failed, it is clear that the programmes were incomplete.

The minimum requirements for an MBO programme are:

1. Each manager’s job includes five to ten goals expressed in specific, measurable
terms.

2. Each manager reporting to the entrepreneur proposes his or her goals in writing.
When you both agree on each goal, a final written statement of the goal is prepared.

3. Each goal consists of the statement of the goal, how it will be measured, and the
work steps necessary to complete it.

4. Results are systematically determined at regular intervals (at least quarterly) and
compared with the goals.

5. When progress towards goals is not in accordance with your plans, problems are
identified and corrective action is taken.

6. Goals at each level of management are related to the level above and below.

Goal Setting

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Goals for each worker are crucial elements in any MBO system. Goals at all levels of
management must be consistent with the organizations goals. Goals of junior workers must
relate to those of senior workers. Goals prepared by the worker responsible for certain
steps in the processing operation must tie in the processing activities. All goals must relate
to and support the long-range objectives for the enterprise.

When all these goals are consistent, then system will be set. Until then, there will be many
workers of the enterprise who exclaim “How can I set my goals when I don’t know where
the owner wants to go?”

Each worker will probably find between five and eight goals enough to cover those aspects
of job crucial to successful performance. These are the elements which his or her
performances will be judged. Other duties which do not fall into the above goal should be
neglected, but they are of secondary importance.

When entrepreneurs first start such a programme, workers will undergo a learning period.
They must learn how to prepare a goal which will make them stretch but isn’t beyond their
capabilities. They must learn to develop ways to effectively measure their performance.
They must learn to anticipate real problems which threaten the achievement of the goals
then take steps to cope with the problems.

During this learning period, workers should first set a few goals. Then as they learn how to
develop and achieve goals, the coverage and number of goals can be extended.

SUMMARY

In short, plans fail (and subsequently, entrepreneurs fail), because crucial factors are
overlooked, and crucial steps in the planning process are omitted

• Specific, measurable, time-phased, realistic goals aren’t really set.

• Commitment to success isn’t obtained from critical people (you, your team
members, and employees.)

• Obstacles aren’t anticipated, milestones aren’t established to check on progress,

provision isn’t made for the unforeseen, and alternative strategies aren’t developed
to handle contingencies.

Moreover, planning should be used to reduce the uncertainty of the future and manage risk
and change, not to forecast the future. Learning from failure, as evidence by reassessing
and resetting goals and plans periodically, is an integral part of this process. Planning also
can be used to build team commitment and obtain collaboration thus:

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• Plan mutually with team members whose commitment is critical to success.

• Make performance expectations clear.

• Create a win/win situation for everyone who is critical to success.

• Provide and solicit feedback on progress to maintain commitment and keep plans
on track.

Lastly, plans should be goal oriented rather than activity oriented, and these should not be
confused. Working harder is vital to new venture success, but it must also be accompanied
by working smarter. Chart 1 summarizes these pitfalls to effective planning, their causes
and cures.

KIND OF GOALS

When managers begin to set their goals, they must want to know which areas are suitable
for goal setting. What are the really important aspects of their jobs rather than that part
which is most visible to them? How can they be sure that their programme is balanced in
the long haul, rather than just reacting to immediate, pressing problems? How can they set
goals which are most likely to help than have more control in their jobs?

It might be useful for them to have a classification of goals that suggest areas of
opportunity. Generally each manager should have five to eight goals. One or two goals in
each of the areas should be helpful

1. Regular work goals

2. Problem solving goals

3. Innovative goals

4. Development goals

1. Regular work goals refer to those activities which make up the major part of the
managers responsibilities. The head of production would be primarily concerned with
developing and conducting the market research and sales programs. Each manager should
be able to find opportunities to operate more efficiently, to improve the quality of the
product or service and to expand the total amount produced or marketed.

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2. Problem solving goals will give managers an opportunity to define their major problems.
Then, they may set a goal to eliminate each one. There is no danger of anyone running out
of problems. New problems or new versions of old problems always seem to replace those
which have been solved.

3. Innovative goals may be viewed the same way. A goal for innovation may apply to an
actual problem but some innovations may not deal with a problem. For example, the head
of building management sets a goal to implement the employee suggestion programme by
putting five suggestions into effect during the next four months. There was no specific
problem to be solved but the manager was just trying to do the best job possible.

4. Development goals recognize how important the development of employees is to the

success of a business. Managers can be encouraged to develop their people just as they are
encouraged to produce more effectively. Every manager must be to some extent a teacher
and coach; each manager must plan for the employees continued growth in both technical
areas and in working together effectively. By asking managers to set at least one goal in the
four areas listed above, entrepreneurs may open their eyes to possibilities they had not
seen before. The goal setting process can be a very useful educational step, even for those
who are primarily specialists.

1.TECHNIQUES OF TIME
MANAGEMENT

Objective: At the end of this topic, the trainee will be able to understand the importance of
managing time effectively.

Importance

Time is inelastic in supply as compared to other resources.

It also cannot be stored, accumulated or brought back.

Besides, many people have too many tasks compared to the amount of time they have to do
them.

Therefore it is important that entrepreneurs are familiar with good time management
techniques and be able to apply them appropriately.

Key Points

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 A. Time scheduling: arrangement of activities or tasks to be performed within a given
time, e.g. through the use of diaries, and time charts. Avoid overscheduling and
scheduling every minute of the day. This allows time for contingencies. Select only
items that could be possibly achieved that day.

B. Time consciousness: are exercised regarding the use of time.

C. Keeping to specifics: handling specific task within a given time limit. Set deadline
and adhere strictly to them.

D. Time management techniques: such as the 80/20 rule, making alternative plans,
making decisions quickly, delegating, establishing deadlines, and reducing paper
work. Handle one task at a time to avoid indecision. Preserve blocks of time –part of
each day or week to think. The 80/20 rule according to Parkinson’s Law is that work
will always be extend and increased to fill all the available time. It is impossible to
accomplish 80% of the task using 20% of the time allocated to it but spend 80%bof
the rest of the time trying to accomplish the remaining 20% of the tasks. Lessons
from this is that achieving perfection is impossible and it is perfectly in order.

TIME MANAGEMENT

Time management is a process by which entrepreneurs accomplish the task and goals
which will enable them to be effective.

Poor time management can result because of the following reasons:

a) Entrepreneur may not fix their priority in their work and therefore, do not approach
their work systematically.
b) Sometime they fix priorities but are not in a position to conduct follow up which
might result into changes in priorities.
c) Entrepreneurs do not do enough preparation for different activities in their planned
and preferred list of tasks.
d) Entrepreneurs might put too much emphasis, in terms of allocation of time, on less
important things and in this process, omits important assignments or jobs.
e) Entrepreneurs may not be in a position to decide work which they can do
themselves and work which may be performed by subordinates or fellow

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 employees. In such cases, entrepreneurs completely fail to delegate some activities
and thus overburden themselves.
f) Entrepreneurs may not be foresighted in their work and may not anticipate
properly the pros and cons of some of the activities which may require more time,
better planning, and higher allocation of other resources. They may also not
anticipate interruptions which are likely to come in the way of completing a job.

Effects of Mismanagement of Time

If time management is not applied properly:

 it will create stress in the mind of performer due to over widening gap between the
goal or desire and fulfillment of the goal. The longer the stress the higher would be
dissatisfaction and frustration leading to an immobile state of mind.

 Time wastage, since unutilized time cannot be brought back and used.

 It will delay decisions. In the absence of proper utilization of time and sequential
scheduling of work, entrepreneurs would be jumping backward and forward in the
decision making process. Then will result in delayed decision making and thereby
affecting the overall working of the organization.

 It will create bad morale among the subordinates and fellow employees
Subordinates will feel that they are not being properly guided or advised due to lack
of time with the entrepreneur.
 Time not managed properly will result in rescheduling, redrafting and even
redesigning activities.

 It will also result to reallocation of other resources –especially money, material

manpower for completing the assignment and job.
How the Time is Spent

Since time is a resource like money or material, the first step in improving its utilization
should be to determine how it is being used presently.

The entrepreneur should clearly define his or her activities, put an account for time
demanded and spent on each activity and finally classify these activities into useful and
wasteful categories.

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 The position of a smallscale entrepreneur is different than a professional manager working
in a big organization. Therefore, it may be possible that some work which may be quite
useful for a small entrepreneur maybe useless for a professional manager.

It is not easy to classify time spent into useful and wasteful categories except in some clear
cut cases where both situations are self-explanatory. Generally, it has been observed that
the activities which produce results are termed as useful and utilized well in terms of time.

Whereas, the cases where concrete results are not available are degraded as wasteful
exercises. In actual practices there may be certain activities for an entrepreneur which
may not give results immediately but they may be useful in the future in running the
enterprise. Examples include contacting people, participating in seminars, conferences,
and talks on industries.

The time wasting activities may be defined in a simple way, as those activities which
keep the entrepreneur from achieving the objectives in the most effective way.

To have a systematic time management procedure, one has to find out the non-productive
or time wasting activities in the total schedule. To find time wasting activities, the
entrepreneur may ask, “of all activities listed, what would happen, if somewhere not done
at all? And if the answer is nothing would happen, then these activities are unwarranted
activities and should not have been done. The main criteria for classification into useful
and time wasting activities would be on the basis of priorities or preferences attached to it.

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 Decision‐Making

5 . DECISION MAKING

Objective: At the end of this topic, the trainees will be able to follow specific procedures when
making business decisions.

Importance
Proper decision making is fundamental to enhancement of enterprise growth and profit
maximization. Problem solving techniques are needed to help trainees’ develop rational decisions
for making decisions.

It is therefore, important that the trainer adequately prepares the trainees to be able to make
rational decisions in their day to day business activities.

Key Points
1. Categories of Problems: problems in business can be classified into three;
 inadequacy of resources,
 organizational problems,
 environmental problems.
2. Problem Identification: a problem can be identified by either of the following methods;
 past experience,
 conducting surveys,
 information gathering,
 consultancy services
 and study work.
3. Problem Analysis: the following three questions might be asked:

a) How does the problem manifest itself thus in terms of symptoms and effects?
b) What are the possible causes of the problem?
c) How does performance compare with original goals and expectations?

4. Methods of Decision Making: these include

 rule of thumb,
 committee approach,
 critical path analysis
 and brainstorming.
5. Problem solving Procedures: includes the following seven steps;
a) State the problem
b) Define the objectives

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c) Develop a diagnostic framework
d) Collect and analyze data
e) Generate alternative solutions
f) Develop and implement action plan
g) Evaluate, obtain a feedback and monitor

A GENERAL APPROACH TO DECISION MAKING

Whether an executive of a major corporation, or a small business owner, the general approach to
systematically solving problems is the same. The following seven-step approach to better
management decision making can be used to solve nearly all problems faced by entrepreneurs.

1. State the Problem. A problem must first exist and be recognized. What is the problem and
why is it a problem? What is ideal and how do current operations vary from that ideal? Identify the
symptoms (what is going wrong) and the causes (why is it going wrong). Try to define all terms,
concepts, variables, and relationships. Quantify the problem to the extent possible.

If the problem is not accurately identified and quickly eg filing customer orders, try to determine how
many orders were incorrectly filed and how long it took to file them.

2. Define the Objectives. How has the problem affected business objectives? Which
objectives are the most crucial? Objectives usually are stated by an action verb like reduce, to
increase, or to improve. Returning to the customer order problem, the major objective would be: 1)
to increase the percentage of orders filed correctly, and 2) to reduce the time it takes to process an
order. A secondary objective could be to simplify and streamline the order filing process.

3. Develop a Diagnostic Framework. Next, establish a diagnostic framework. That is,

decide what methods are going to be used, what kinds of information are needed, and how and where
the review of company documents, time and motion tests, or something else? What are the
assumptions (facts assumed to be correct) of the study? What are the criteria used to judge the
study? What time, budget, or other constraints are there? What kind of quantitative or other
specific techniques are going to be used to analyze the data? In other words, the diagnostic
framework establishes the scope and methods for solving the problem.

4. Collect and Analyze the Data. The next step is to collect the data (by following the
methods established in step 3). Raw data are then tabulated and organized to facilitate analysis.
Tables, charts, graphs, indexes and matrices are some of the standard ways to organize raw data.
Analysis is the critical prerequisite for sound business decision making. What do the data reveal?
What facts, patterns, and trends can be seen in the data? Many quantitative techniques covered can
be used during this step.

5. Generate Alternative Solution. After the analysis has been finished, some specific
conclusions about the nature of the problem and its resolution should have been reached . The step is
to develop alternate solutions to the problem and rank them in order of their net benefits. But how
alternatives are best generated again, there are several well established techniques such as: the

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Nominal Group Method, the Delphi method, and brainstorming. In all these methods a group is
involved, all of whom have reviewed the data and analysis. The approach is to have an informed
group suggesting a variety of possible solutions.

6. Developing and Implement Action Plan. Select the best solution to the problem but be
certain to understand clearly why it is the best, that is, how it achieves the objectives established in
step better than the other alternative. Then develop an effective method (action plan) to implement
the solution. At this point an important organizational consideration arises who is going to be
responsible for seeing the implementation through and what authority does he have? The selected
person should be responsible for seeing that all task, deadlines and reports are performed and met,
and written. There are several techniques available to decision maker implementing an action plan.

7. Evaluate, Obtain Feedback and Monitor. After the action plan has been implemented to
solve a problem, management must evaluate its effectiveness. Evaluation standards must be
determined, feedback channels developed, and monitoring performed. This step should be done after
3 to 5 weeks and again at about 6 months. The goal is to answer the bottom line question. “has the
problem been solved?”

DETERMINING SOLUTIONS

Once a problem has been defined and all relevant information and data have been collected, you
must identify possible solutions to the problem. You may want to begin with a “brainstorming”
session where a group of employees or other people discuss and develop a list of possible
alternative solutions.

This brainstorming technique often result in unique contributions by the participants , since they see
the problem from various viewpoints. Never criticize or reject any solution suggested during the
brainstorming session. It is important to encourage group members to develop as many potential
solutions as possible. If necessary, hints and suggestions should be given to keep the discussion
active, and encourage additional comments and ideas from the participants.

The following criteria may prove useful when you evaluate a proposed solution.

- Is the solution logical?

- Is it possible to put the solution into practice?
- What additional problems are created by the solution?

When the group reviews all possible solutions on the list, some solutions may be combined while
other solutions may be eliminated. When the group has reduced the options to three or four, you
may want to consider each potential solution extensively and in depth. Although many problems
have no single right solution, it is up to you to determine the best possible solution to meet your
needs.

A problem solving chart is one way of organizing possible solutions to problems by analysing
potential advantages, disadvantages and consequences.

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 Listing potential advantages will indicate how each potential solution will benefit you. The
potential disadvantages will illustrate how the potential solution will adversely affect you. In some
instances, an advantage or disadvantage may be the same for two or more alternative solutions.

Another procedure for analyzing potential solutions is to identify reasons "for" and reasons
"against" each potential solution.

- Write a brief description of the problem

- Write a brief description of the proposed solution.

- In the "Reasons For" column, list important factors which would favor implementing the
proposed solution.
- In the "Reasons Against" column, list important factors for not implementing the proposed
solution.
- Rate each factor by its importance to you. The numerical rating might be 1, 2,3,4,5, where a
low rating of 1 indicates that the factor affects the problem only slightly and a high rating of
5 indicates that the factor is extremely important in making your decision. Each factor in the
"Reasons For" column and each factor in the "Reasons Against” column would receive a
numerical rating.
- Add the ratings in each of the two "rating” columns. The column with the higher total will
give you some indication of the potential for a particular solution. If there is a big difference
between the two totals (in favour of "Reasons For” the solution), you may feel more secure
in the use of this technique to make a decision.
- If there is little difference in totals for both columns, it might indicate that you need
additional information about the problem.
- Use the Solution Evaluation table for the top two or three solutions identified in the
Problem-Solving chart. Comparing the results should help to make your decision easier.

DETAILS
1. Decision making is the study of identifying and choosing alternatives based on the values
and preferences of the decision maker.

Making a decision implies that there are alternative choices to be considered, and in such a case
we want not only to identify as many of these alternatives as possible but to choose the one that
(1) has the highest probability of success or effectiveness and (2) best fits with our goals, desires,
lifestyle, values.

The two important ideas here are

 there must be some genuine alternatives to choose from among.

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  Every decision must be made in the light of some criteria, which reflect the values and
preferences of the decision maker; often influenced by corporate rules or culture, law,
best practices.

Organizations operate by people making decisions. A manager plans, organizes, staffs, leads,
and controls her team by executing decisions. The effectiveness and quality of those decisions
determine how successful a manager will be.

Managers are constantly called upon to make decisions in order to solve problems. Decision
making and problem solving are ongoing processes of evaluating situations or problems,
considering alternatives, making choices, and following them up with the necessary actions.

Decision Making Process

The decision‐making process involves the following steps:

1. State the problem.

a) A problem must first exist and be recognized.
b) What is the problem and why is it a problem?
c) What is ideal and how do current operations vary from that ideal?
d) Identify the symptoms and the cause (What is going wrong and why is it going
wrong)
e) Define all terms, concepts, variables and relationships
f) Quantify the problem

2. Define the Objectives

a) How has the problem affected business objectives?
b) Which objectives are the most crucial

3. Develop A Diagnostic Framework

a) Decide methods to be used
b) What kind of information is needed
c) How and where will the information be found
d) Criteria to judge the study
e) Time, budget
f) Techniques to analyze the data, ie scope and methods for solving the problem

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 4. Collect and Analyze the Data
a) Follow the method established in step 3 above
b) Organize raw data: tables, charts, graphs, indexes and matrices
c) What does the data reveal? Facts, patterns and trends
d) What conclusion about the nature of the problem and it’s resolution

5. Generate Alternative Solutions

a) Develop alternative
6. Implement the decision.

7. Establish a control and evaluation system.

Define the problem

The decision‐making process begins when a manager identifies the real problem. The accurate
definition of the problem affects all the steps that follow; if the problem is inaccurately defined,
every step in the decision‐making process will be based on an incorrect starting point. One way
that a manager can help determine the true problem in a situation is by identifying the problem
separately from its symptoms.

The most obviously troubling situations found in an organization can usually be identified as
symptoms of underlying problems. (See Table for some examples of symptoms.) These
symptoms all indicate that something is wrong with an organization, but they don't identify root
causes. A successful manager doesn't just attack symptoms; he works to uncover the factors that
cause these symptoms.

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All managers want to make the best decisions. To do so, managers need to have the ideal
resources — information, time, personnel, equipment, and supplies — and identify any limiting
factors. Realistically, managers operate in an environment that normally doesn't provide ideal
resources.

Time pressures frequently cause a manager to move forward after considering only the first or
most obvious answers. However, successful problem solving requires thorough examination of
the challenge, and a quick answer may not result in a permanent solution. A manager should
think through and investigate several alternative solutions to a single problem before making a
quick decision.

One of the best known methods for developing alternatives is through brainstorming, where a
group works together to generate ideas and alternative solutions. The assumption behind
brainstorming is that the group dynamic stimulates thinking — one person's ideas, no matter how
outrageous, can generate ideas from the others in the group. Ideally, this spawning of ideas is
contagious, and before long, lots of suggestions and ideas flow. Brainstorming usually requires
30 minutes to an hour. The following specific rules should be followed during brainstorming
sessions:
Concentrate on the problem at hand. This rule keeps the discussion very specific and avoids
the group's tendency to address the events leading up to the current problem.
Entertain all ideas. In fact, the more ideas that come up, the better. In other words, there are no
bad ideas. Encouragement of the group to freely offer all thoughts on the subject is important.

39
Participants should be encouraged to present ideas no matter how ridiculous they seem, because
such ideas may spark a creative thought on the part of someone else.
Refrain from allowing members to evaluate others' ideas on the spot. All judgments should
be deferred until all thoughts are presented, and the group concurs on the best ideas.

Although brainstorming is the most common technique to develop alternative solutions,

managers can use several other ways to help develop solutions. Here are some examples:

Nominal group technique. This method involves the use of a highly structured meeting,
complete with an agenda, and restricts discussion or interpersonal communication during the
decision‐making process. This technique is useful because it ensures that every group member
has equal input in the decision‐making process. It also avoids some of the pitfalls, such as
pressure to conform, group dominance, hostility, and conflict, that can plague a more interactive,
spontaneous, unstructured forum such as brainstorming.
Delphi technique. With this technique, participants never meet, but a group leader uses written
questionnaires to conduct the decision making.

No matter what technique is used, group decision making has clear advantages and
disadvantages when compared with individual decision making.

The following are among the advantages of group decision

Groups provide a broader perspective.

 Employees are more likely to be satisfied and to support the final decision.

 Opportunities for discussion help to answer questions and reduce uncertainties for the
decision makers.

Regardless of the method used, a manager needs to evaluate each alternative.

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In a typical decision making situation, as you move from step to step here, you will probably find
yourself moving back and forth also.

1. Identify the decision to be made together with the goals it should achieve. Determine the
scope and limitations of the decision. Is the new job to be permanent or temporary or is that not
yet known (thus requiring another decision later)? Is the new package for the product to be put
into all markets or just into a test market? How might the scope of the decision be changed--that
is, what are its possible parameters?

When thinking about the decision, be sure to include a clarification of goals: We must decide
whom to hire for our new secretary, one who will be able to create an efficient and organized
office. Or, We must decide where to go on vacation, where we can relax and get some rest from
the fast pace of society.

2. Get the facts. But remember that you cannot get all the facts. Get as many facts as possible
about a decision within the limits of time imposed on you and your ability to process them, but
remember that virtually every decision must be made in partial ignorance. Lack of complete
information must not be allowed to paralyze your decision. A decision based on partial
knowledge is usually better than not making the decision when a decision is really needed. The
proverb that "any decision is better than no decision," while perhaps extreme, shows the
importance of choosing. When you are racing toward a bridge support, you must decide to turn
away to the right or to the left. Which way you turn is less important than the fact that you do
indeed turn.

As part of your collection of facts, list your feelings, hunches, and intuitive urges. Many
decisions must ultimately rely on or be influenced by intuition because of the remaining degree
of uncertainty involved in the situation.

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Also as part of your collection of facts, consult those who will be affected by and who will have
to implement your decision. Input from these people not only helps supply you with information
and help in making the decision but it begins to produce the acceptance necessary in the
implementers because they feel that they are part of the decision making process. As Russell
Ackoff noted in The Art of Problem Solving, not consulting people involved in a decision is often
perceived as an act of aggression.

3. Develop alternatives. Make a list of all the possible choices you have, including the choice of
doing nothing. Not choosing one of the candidates or one of the building sites is in itself a
decision. Often a non-decision is harmful as we mentioned above--not choosing to turn either
right or left is to choose to drive into the bridge. But sometimes the decision to do nothing is
useful or at least better than the alternatives, so it should always be consciously included in the
decision making process.

Also be sure to think about not just identifying available alternatives but creating alternatives that
don't yet exist. For example, if you want to choose which major to pursue in college, think not
only of the available ones in the catalog, but of designing your own course of study.

4. Rate each alternative. This is the evaluation of the value of each alternative. Consider the
negative of each alternative (cost, consequences, problems created, time needed, etc.) and the
positive of each (money saved, time saved, added creativity or happiness to company or
employees, etc.). Remember here that the alternative that you might like best or that would in the
best of all possible worlds be an obvious choice will, however, not be functional in the real world
because of too much cost, time, or lack of acceptance by others.

Also don't forget to include indirect factors in the rating. If you are deciding between machines
X, Y, and Z and you already have an employee who knows how to operate machine Z, that fact
should be considered. If you are choosing an investigative team to send to Japan to look at plant
sites and you have very qualified candidates A, B, and C, the fact that B is a very fast typist, a
superior photographer or has some other side benefit in addition to being a qualified team
member, should be considered. In fact, what you put on your hobbies and interests line on your
resume can be quite important when you apply for a job just because employers are interested in
getting people with a good collection of additional abilities.

5. Rate the risk of each alternative. In problem solving, you hunt around for a solution that best
solves a particular problem, and by such a hunt you are pretty sure that the solution will work. In
decision making, however, there is always some degree of uncertainty in any choice. Will Bill
really work out as the new supervisor? If we decide to expand into Canada, will our sales and
profits really increase? If we let Jane date Fred at age fifteen, will the experience be good? If you
decide to marry person X or buy car Y or go to school Z, will that be the best or at least a
successful choice?

Risks can be rated as percentages, ratios, rankings, grades or in any other form that allows them
to be compared. See the section on risk evaluation for more details on risking.

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6. Make the decision. If you are making an individual decision, apply your preferences (which
may take into account the preferences of others). Choose the path to follow, whether it includes
one of the alternatives, more than one of them (a multiple decision) or the decision to choose
none.

And of course, don't forget to implement the decision and then evaluate the implementation, just
as you would in a problem solving experience.

One important item often overlooked in implementation is that when explaining the decision to
those involved in carrying it out or those who will be affected by it, don't just list the projected
benefits: frankly explain the risks and the drawbacks involved and tell why you believe the
proposed benefits outweigh the negatives. Implementers are much more willing to support
decisions when they (1) understand the risks and (2) believe that they are being treated with
honesty and like adults.

Remember also that very few decisions are irrevocable. Don't cancel a decision prematurely
because many new plans require time to work--it may take years for your new branch office in
Paris to get profitable--but don't hesitate to change directions if a particular decision clearly is
not working out or is being somehow harmful. You can always make another decision to do
something else.

7. Implement the decision as per the planning done.

8. Monitor and evaluate the performance.

Kinds of Decisions
There are several basic kinds of decisions.

1. Decisions whether. This is the yes/no, either/or decision that must be made before we proceed
with the selection of an alternative. Should I buy a new TV? Should I travel this summer?
Decisions whether are made by weighing reasons pro and con. A simple worksheet with two
columns (one for Pro--reasons for, and one with Con--reasons against) can be useful for this kind
of decision.

It is important to be aware of having made a decision whether, since too often we assume that
decision making begins with the identification of alternatives, assuming that the decision to
choose one has already been made.

2. Decisions which. These decisions involve a choice of one or more alternatives from among a
set of possibilities, the choice being based on how well each alternative measures up to a set of
predefined criteria.

3. Contingent decisions. These are decisions that have been made but put on hold until some
condition is met.

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For example, I have decided to buy that car if I can get it for the right price; I have decided to
write that article if I can work the necessary time for it into my schedule. OR even, We'll take the
route through the valley if we can control the ridge and if we detect no enemy activity to the
north.

Most people carry around a set of already made, contingent decisions, just waiting for the right
conditions or opportunity to arise. Time, energy, price, availability, opportunity,
encouragement--all these factors can figure into the necessary conditions that need to be met
before we can act on our decision. Some contingent decisions are unstated or even exist below
the awareness of the decision maker. These are the type that occur when we seize opportunity.
We don't walk around thinking, "If I see a new laser printer for $38, I'll buy it," but if we happen
upon a deal like that and we have been contemplating getting a new printer, the decision is made
quickly. Decisions made in sports and warfare are like this. The best contingent and
opportunistic decisions are made by the prepared mind--one that has thought about criteria and
alternatives in the past.

4. Contingent alternatives. Similar to contingent decisions, contingent alternatives involve two

or more choices of action, one of which will be taken when the appropriate trigger occurs. Often
this trigger is an event or more information.

The Components of Decision Making

The Decision Environment
Every decision is made within a decision environment, which is defined as the collection of
information, alternatives, values, and preferences available at the time of the decision. An ideal
decision environment would include all possible information, all of it accurate, and every
possible alternative. However, both information and alternatives are constrained because the time
and effort to gain information or identify alternatives are limited. The time constraint simply
means that a decision must be made by a certain time. The effort constraint reflects the limits of
manpower, money, and priorities. (You wouldn't want to spend three hours and half a tank of gas
trying to find the very best parking place at the mall.) Since decisions must be made within this
constrained environment, we can say that the major challenge of decision making is
uncertainty, and a major goal of decision analysis is to reduce uncertainty. We can almost never
have all information needed to make a decision with certainty, so most decisions involve an
undeniable amount of risk.

The fact that decisions must be made within a limiting decision environment suggests two things.
First, it explains why hindsight is so much more accurate and better at making decisions that
foresight. As time passes, the decision environment continues to grow and expand. New
information and new alternatives appear--even after the decision must be made. Armed with new
information after the fact, the hindsighters can many times look back and make a much better
decision than the original maker, because the decision environment has continued to expand.

The second thing suggested by the decision-within-an-environment idea follows from the above
point. Since the decision environment continues to expand as time passes, it is often advisable to

44
put off making a decision until close to the deadline. Information and alternatives continue to
grow as time passes, so to have access to the most information and to the best alternatives, do not
make the decision too soon. Now, since we are dealing with real life, it is obvious that some
alternatives might no longer be available if too much time passes; that is a tension we have to
work with, a tension that helps to shape the cutoff date for the decision.

Delaying a decision as long as reasonably possible, then, provides three benefits:

1. The decision environment will be larger, providing more information. There is also time for
more thoughtful and extended analysis.
2. New alternatives might be recognized or created. Version 2.0 might be released.
3. The decision maker's preferences might change. With further thought, wisdom, and maturity,
you may decide not to buy car X and instead to buy car Y.

And delaying a decision involves several risks:

1. As the decision environment continues to grow, the decision maker might become
overwhelmed with too much information and either make a poorer decision or else face decision
paralysis.

2. Some alternatives might become unavailable because of events occurring during the delay. In
a few cases, where the decision was between two alternatives (attack the pass or circle around
behind the large rock), both alternatives might become unavailable, leaving the decision maker
with nothing. And we have all had the experience of seeing some amazing bargain only to
hesitate and find that when we go back to buy the item, it is sold out.

3. In a competitive environment, a faster rival might make the decision and gain advantage.
Another manufacturer might bring a similar product to market before you (because that company
didn't delay the decision) or the opposing army might have seized the pass while the other army
was "letting the decision environment grow."

Concepts and Definitions

1. Information. This is knowledge about the decision, the effects of its alternatives, the
probability of each alternative, and so forth. A major point to make here is that while substantial
information is desirable, the statement that "the more information, the better" is not true. Too
much information can actually reduce the quality of a decision. See the discussion on The Effects
of Quantity on Decision Making in Part 1.

2. Alternatives. These are the possibilities one has to choose from. Alternatives can be identified
(that is, searched for and located) or even developed (created where they did not previously
exist). Merely searching for preexisting alternatives will result in less effective decision making.

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3. Criteria. These are the characteristics or requirements that each alternative must possess to a
greater or lesser extent. Usually the alternatives are rated on how well they possess each
criterion. For example, alternative Toyota ranks an 8 on the criterion of economy, while
alternative Buick ranks a 6 on the same criterion.

4. Goals. What is it you want to accomplish? Strangely enough, many decision makers collect a
bunch of alternatives (say cars to buy or people to marry) and then ask, "Which should I
choose?" without thinking first of what their goals are, what overall objective they want to
achieve. Next time you find yourself asking, "What should I do? What should I choose?" ask
yourself first, "What are my goals?"

A component of goal identification should be included in every instance of decision analysis.

5. Value. Value refers to how desirable a particular outcome is, the value of the alternative,
whether in dollars, satisfaction, or other benefit.

6. Preferences. These reflect the philosophy and moral hierarchy of the decision maker. We
could say that they are the decision maker's "values," but that might be confusing with the other
use of the word, above. If we could use that word here, we would say that personal values dictate
preferences. Some people prefer excitement to calmness, certainty to risk, efficiency to esthetics,
quality to quantity, and so on. Thus, when one person chooses to ride the wildest roller coaster in
the park and another chooses a mild ride, both may be making good decisions, if based on their
individual preferences.

7. Decision Quality. This is a rating of whether a decision is good or bad. A good decision is a
logical one based on the available information and reflecting the preferences of the decision
maker.

The important concept to grasp here is that the quality of a decision is not related to its outcome:
a good decision can have either a good or a bad outcome. Similarly, a bad decision (one not
based on adequate information or not reflecting the decision maker's preferences) can still have a
good outcome.

For example, if you do extensive analysis and carefully decide on a certain investment based on
what you know about its risks and your preferences, then your decision is a good one, even
though you may lose money on the investment. Similarly, if you throw a dart at a listing of stocks
and buy the one the dart hits, your decision is a bad one, even though the stock may go up in
value.

Good decisions that result in bad outcomes should thus not be cause for guilt or recrimination. If
you decide to take the scenic route based on what you know of the road (reasonably safe, not
heavily traveled) and your preferences (minimal risk, prefer scenery over early arrival), then
your decision is a good one, even though you might happen to get in an accident, or have a flat
tire in the middle of nowhere. It is not justified to say, "Well, this was a bad decision."

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In judging the quality of a decision, in addition to the concerns of logic, use of information and
alternatives, three other considerations come into play:

A. The decision must meet the stated objectives most thoroughly and completely. How well does
the alternative chosen meet the goals identified?

B. The decision must meet the stated objectives most efficiently, with concern over cost, energy,
side effects. Are there negative consequences to the alternative that make that choice less
desirable? We sometimes overlook this consideration in our search for thrills.

C. The decision must take into account valuable byproducts or indirect advantages. A new
employee candidate may also have extra abilities not directly related to the job but valuable to
the company nonetheless. These should be taken into account.

8. Acceptance. Those who must implement the decision or who will be affected by it must
accept it both intellectually and emotionally.

Acceptance is a critical factor because it occasionally conflicts with one of the quality criteria. In
such cases, the best thing to do may be to choose a lesser quality solution that has greater
acceptance.

For example, when cake mixes first were put on the market, manufacturers put everything into
the mix--the highest quality and most efficient solution. Only water had to be added. However,
the mixes didn't sell well--they weren't accepted. After investigation, the makers discovered that
women didn't like the mixes because using the mixes made them feel guilty: they weren't good
wives because they were taking a shortcut to making a cake. The solution was to take the egg
and sometimes the milk out of the mix so that the women would have something to do to "make"
the cake other than just adding water. Now they had to add egg and perhaps milk, making them
feel more useful. The need to feel useful and a contributor is one of the most basic of human
needs. Thus, while the new solution was less efficient in theoretical terms, it was much more
acceptable. Cake mixes with the new formula became quite popular.

Thus, the inferior method may produce greater results if the inferior one has greater support. One
of the most important considerations in decision making, then, is the people factor. Always
consider a decision in light of the people implementation.

A decision that may be technologically brilliant but that is sociologically stupid will not work.
Only decisions that are implemented, and implemented with thoroughness (and preferably
enthusiasm) will work the way they are intended to.

Approaches to Decision Making

There are two major approaches to decision making in an organization, the authoritarian method
in which an executive figure makes a decision for the group and the group method in which the
group decides what to do.

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1. Authoritarian.

The manager makes the decision based on the knowledge he can gather. He then must explain
the decision to the group and gain their acceptance of it. In some studies, the time breakdown for
a typical operating decision is something like this:

make decision, 5 min.; explain decision, 30 min.; gain acceptance, 30 min.

2. Group. The group shares ideas and analyses, and agrees upon a decision to implement.
Studies show that the group often has values, feelings, and reactions quite different from those
the manager supposes they have. No one knows the group and its tastes and preferences as well
as the group itself. And, interestingly, the time breakdown is something like this:

group makes decision, 30 min.; explain decision, 0 min.; gain acceptance, 0 min.

Clearly, just from an efficiency standpoint, group decision making is better. More than this, it
has been shown many times that people prefer to implement the ideas they themselves think
of. They will work harder and more energetically to implement their own idea than they would to
implement an idea imposed on them by others. We all have a love for our own ideas and
solutions, and we will always work harder on a solution supported by our own vision and our
own ego than we will on a solution we have little creative involvement with.

There are two types of group decision making sessions. First is free discussion in which the
problem is simply put on the table for the group to talk about. For example, Joe has been offered
a job change from shift supervisor to maintenance foreman. Should he take the job?

The other kind of group decision making is developmental discussion or structured discussion.
Here the problem is broken down into steps, smaller parts with specific goals. For example,
instead of asking generally whether Joe should take the job, the group works on sub questions:
What are Joe's skills? What skills does the new job require? How does Joe rate on each of the
skills required? Notice that these questions seek specific information rather than more general
impressionistic opinions.

Developmental discussion (1) ensures systematic coverage of a topic and (2) ensures that all
members of the group are talking about the same aspect of the problem at the same time.

Factors Affecting Decision Making

Whenever we are involved in making decisions, a number of factors can affect the process we
follow and ultimately the decision we make. Below are some of the factors that will affect the

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effectiveness of the decision:

Perception Issues

 Perception Issues – perception can be described as the way in which individuals interpret
their environment. An individual’s perception can influence how they make decisions and
solve problems. For example, when information about a problem needs to be gathered the
individual’s perception will impact on where the information is sought and the type of
information regarded as relevant.

 Perception can be influenced by the perceiver, the object or the situation. The perceiver,
the individual perceiving the object, will be heavily influenced by their personal
characteristics such as: background and experience, personal values, personal
expectations and personal interests.

 The object – which refers to any person, item or event, can have an impact on the way it
is perceived. For example, when a manager receives a number of reports to read he may
be more inclined to read the one with the most colourful cover as this one stands out.

 The situation – time, location and other situational factors can influence our perception of
an object. For example, a team leader may notice team members who work late on the
same evenings as the team leader.

Issues within the organization

 A number of organizational issues can impact on the decision making process. These
issues include: policies and procedures, organizational hierarchy and organizational
politics.

 Policies and Procedures - Many organizations have formalized policies and procedures
which have been developed to resolve common problems and to guide managers when
making decisions. For example, many organizations have documented disciplinary
procedures which guide managers through a process of resolving issues with staff
members.

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  Organizational Hierarchy – this refers to the management structure of the organization.
Most organizations have different levels of management which carry with them different
degrees of authority. The degree of authority directly impacts on the nature of the
decisions an individual can make. For example, a customer contact centre team leader
cannot make decisions about overall goals of the organization. However, the team leader
can make decisions about how their team contributes to the achievement of the
organization’s goals.

 Organizational polities – refers to behavior displayed by individuals and groups which is

designed to influence others. Individuals and teams will often use politics to advance
their careers, advance their interests and ideas, as well as increase their rewards.

 Organizations are made up of individuals with different beliefs, values and interests.
These differences are often the driving forces behind organizational politics. For
example, two teams believe they require an extra team member. Unfortunately the
organization can only afford one new employee. The two teams may well use politics in
an attempt to influence their manager to allocate the new employee to their team.

Issues within the environment

Environmental issues are the external factors that affect the organization. The types of external
factors that can have an effect on decision making: the market in which the organization
operations, the economy, government legislation, customers’ reaction to the organization’s
products and services

Common Decision making mistakes

Many of the factors which affect decision making process can lead to mistakes being made. By
being aware of the types of mistakes that can be made and by understanding the reasons for the
mistakes, a team leader is in a better position to avoid making them.

Some common mistakes that decision makers should be aware of include:

 Only hearing and seeing what we want. Each individual has their own unique set of
preferences or biases which blinker them to certain information. The best way to deal
with this problem is to identify your preferences and biases while attempting to be open
to the information around you.

 Placing too great a reliance on the information you receive from others. Often we rely on
certain individuals to provide support and guidance. This may be a suitable course of

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 action in many cases. However, if the individual is not closely involved in the problem
situation they may not have the necessary information or knowledge to help make the
decision.

 Placing too little emphasis on the information you receive from others. This issue can
easily occur in a team situation. In many cases the team members are the people who are
most closely involved in a problem situation and they often have the most pertinent
information in relation to the problem. The best way to deal with this issue is to ensure
that team members are involved in the decision making process.

 Ignoring your intuition. On many occasions we are actually aware at a subconscious level
of the correct course of action. Unfortunately, we often tend to ignore our intuition or gut
feeling, the sixth sense or whatever we may choose to call it.

Knowing the subject area and evidence base

There are a wide variety of online journals, books and reference materials you can utilize to
research the evidence base. The Knowledge Network is a useful starting point. As experience
develops you will identify and build your set of cases with identifiable patterns and typical
outcomes that can provide valuable background knowledge when dealing with a current
situation.

Knowing Yourself

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Being aware of your behaviour, competencies, attitudes, emotions and values and not just your
own but also those of your patients/clients and colleagues. It's also important to know your
limitations - being aware of when to seek help, advice and support. Remember - you are part of
a team.

Knowing the Environment

Awareness and recognition of the approach to decision making and the wider team dynamics
within your organization.

Intelligence of the decision-maker

Higher intelligence generally results in highly conservative attitudes and highly conservative
decision makers take low risks. There are others who are more willing to take calculated risks if
the potential rewards are larger and there is some chance of success.

Expectation of the decision-maker:

People with high expectations are generally highly optimistic in nature and are willing to make
decisions even with less information. The decision makers with low expectations of success will
require more and more information to decide upon a course of action.

Time constraints:
As the complexity of the personal habits of the decision maker and the complexity of the
decision variables increase, so does the time required to make a rational decision. Even though
there are certain individuals who work best under time pressures and may outperform others
under severe time constraints, most people require lime to gather all the available information for
evaluation purposes.

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Personal Habits

Personal habits of the decision-maker, formed through social environmental influences and
personal perceptual processes must be studied in order to predict his decision-making style.
Some people stick to their decisions even when these decisions are not optimal. For example,
Hitler found himself bound by his own decisions. Once he decided to attack Russia, there was no
going back even when he realized that the decision was not the right one.
Some people cannot admit that they were wrong and they continue with their decisions even
ignoring evidence which indicates that a change is necessary. Some decision-makers shift the
blame for failure on outside factors rather than their own mistakes. These personal habits have
great impact on organizational operations and effectiveness.

Social and Cultural Influences

The social and group norms exert considerable influence on the style of the decision-maker.
Ebert and Mitchell define a social norm to be an evaluating scale designating on acceptable
latitude and an objectionable latitude for behavior activity, events, beliefs or any object of
concern to members of a social unit. In other words social norm is the standard and accepted way
of making judgments.’

Similarly, cultural upbringing and various cultural dimensions have a profound impact on the
decision-making style of an individual. For example, in the Japanese organizational system, a
decision maker arrives at a decision in consensus with others. This style is culturally oriented and
makes implementation of the decision much easier since everybody participates in the decision-
making process. In America, on the contrary, the decision-making style is generally
individualistic with the help of decision models and quantitative techniques.

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making.html#sthash.MuffuIDe.dpuf

Decision Making Levels

Operational decisions are the day-to-day decisions needed to operate the organization.
Operational decisions are more routine and follow known rules. How many? To what
specification? These decisions involve more limited resources, have a shorter-term application
and can be taken by middle or first line managers.

These decisions affect the organization for short periods of time - perhaps for a few days or
weeks. In a clothing store, an operational decision is whether or not to order more white shirts.

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This type of decision is typically made by a lower-level manager. Operational decisions are
distinct from tactical and strategic decisions in that they are made frequently. The decisions to
order white shirts may be repeated on a weekly basis. In addition, operational decisions tend to
be very structured, meaning the decision is well-structured and there are well-defined procedures
and mathematical formulas to assist the manager.

Tactical decisions, on the other hand, are those decisions that involve formulating and
implementing policies for the organization. Tactical decisions are about how to manage
performance to achieve the strategy. What resources are needed? What is the timescale? These
decisions are distinctive but within clearer boundaries. They may involve significant resources,
have medium-term implications and may be taken by senior or middle managers.

Policy decisions have more lasting effects in the organization, perhaps for months or years.
Tactical decisions are usually made by mid-level managers. For example, deciding whether or
not to sell white shirts the following year is a form of tactical decision. In addition, tactical
decisions are usually semi-structured. The procedure for making tactical decisions is not as well-
defined.

Strategic decisions are made by top managers and involve setting long-term organizational
goals and objectives. Strategic decisions are big choices of identity and direction. Who are we?
Where are we heading? These decisions are often complex and multi-dimensional. They may
involve large sums of money, have a long-term impact and are usually taken by senior
management.Strategic decisions affect the business direction of a company and help determine
what markets to play in and how. Because of the long-term effects, these types of decisions are
made less frequently, in some cases every five to ten years. The decision to get out of the
clothing business and sell outdoor sports equipment instead is a strategic decision with long-term
consequences. Strategic decisions are generally unstructured. There are few foolproof procedures
for determining corporate strategy and deciding what business to be in.

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decisions.html#ixzz2hrpGtEPP

Types of decisions

A business continually makes decisions at all levels. Think of a retailer such as Next. To keep
the brand’s high profile position, its managers have to make many decisions. Each major
strategic decision leads to tactical decisions, which break down into operational decisions.

1. ORGANISATIONAL AND PERSONAL DECISIONS:-

Organizational decisions are made to advance the interest of the organization. When an executive
acts formally in his expected role in an organization he makes organizational decisions making

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become organizations official decisions making power is delegated to others also and calls for
decisions at subordinate levels supporting it. They thus touch off chain of behavior throughout
the organization. Personal decisions are made by an executive as an individual and not as a part
of an organization. An executive who charges jobs or organization is making a personal decision.
Decisions to many to buy a house, to purchase a car are examples of personal decisions. Such
decisions life of an executive but may affect the personal life of an executive but may affect the
organization sometimes directly or indirectly.

2. INDIVIDUAL AND GROUP DECISIONS:-

When a decision is taken by an individual in the organization, it is known as individual decision.
These are concerned mainly with routine problems for which broad policies are available. Such
decisions are generally taken in small organizations and in those organizations where autocratic
style of management prevails. Group decisions are those taken by a group of persons constituted
for the purpose. Decisions taken by the board of directors or a committee are examples of group
decisions. Group decision making generally results in more realistic and well balanced decisions
and encourages participative decision making.

3. ROUTINE AND STRATEGIC DECISIONS:-

Routine decisions are made repetitively following certain established rules, procedures and
policies. They do not require collection of new data and can be taken without much
deliberations. Such decisions are taken generally by the executives at the middle and lower
management levels. Strategic or basic.decisions, on the other hand, are more important and are
generally taken by the top management of organizations.They relate to policy matters and so
require a thorough fact finding and analysis of the possible alternatives. Launching a new
programme, location of a new plant, installation of a computer system are examples of strategic
decisions.

4. PROGRAMMED AND NON-PROGRAMMED DECISIONS: -

Programmed decisions are concerned with relatively routine and repetitive problems.
Information on these problems is already available and can be processed in a pre-planned
manner. Such decisions have short-term impact and are relatively simply. They are, made at
lower levels of management. These decisions require little thought and judgment. The decision
maker identifiesthe problem and applies the predetermined solution. For example, if an employee
is habitually late comer he can easily be dealt with under the established procedure. Non-
programmed decisions deal with unique or unusual problems. Such novel or non-repetitive
problems cannot be tackled in a predetermined manner. There are no cut-and-dried of executive
judgment and deliberation is required to solve them. To order firing on a rioting mob, to impose
curfew in the city, opening of a new branch are examples of such decisions. The ability to make
good non-programmed decisions help to distinguish effective executives from non-effective
executives.

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5. POLICY AND CREATIVE DECISIONS:-
Policy decisions are of vital importance and are taken by the top management.They effect the
entire organization. But operating decisions are taken by the lower management in order to put
into action the policy decisions. For instance, the bonus issue is a policy matter which is to be
decided by the top management and calculation of bonus is an operating decision which is taken
at the lower levels.

Styles of the Decision Making

A decision can be taken at the various stages whenever it is required and the Decision can be
made by the various functional executives of an organization. So it can be said that the
Decisions can be –
1. Taken by the individual manager responsible for that particular department and work.
2. Can be consultative in the nature: – can further be either formal or informal in the
nature.
3. The various group decisions can be taken with the help of the –
a. Co actions
b. Task groups
c. The interacting groups
d. Brainstorming
e. Delphi techniques
f. Nominal grouping technique
g. Consensus mapping

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Coping with Competition
How should a business deal with increased competition?

The best way to deal with competition is to effectively identify it through market research and
industry knowledge. The company should also position itself in the market relative to its
competition. It should focus on brand recognition and product differentiation to establish its
name as separate from that of competitors. The company should also follow competitor
movements, such as price changes, introduction of new products and mergers and acquisitions.
The company should always be aware of its competitors and improve itself and its offerings
based on that as an ongoing process.

Don’t try to keep up with your competitors. Just don’t do it. It is the wrong move.

Think about it. Competitor A cuts her price in half and gains some customers. What do you do?

Cut your price too, and hope to win back some of those customers? You didn’t get into business

to be a copycat. You need to set your own path.

Don’t Follow

If you are making moves because of actions your competitors are taking, you are inevitably
sailing in their wake. The competitor becomes the leader. You are now making your business

decisions based on their business plan and vision, and not your own. Congratulations, you’re a

follower.

If you are the owner of a meaningful business, you will never change course in reaction to the

actions of a competitor. Instead, you will make all of your decisions based on your own plan. Let

everyone else follow some lemming over the cliff. Your job is simple. Craft a business that

works for you and for your customers.

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It’s hard to lose business to a competitor. The gut reaction is to think that you are doing

something wrong. You will be tempted to change course, to play the game by your competitor’s

rules. Well, don’t. You better have your own set of rules that you play by. If you deliver superior

service, you have no business trying to compete on price.

You Don’t Get Every Customer

Here’s the thing. You can’t have every single customer. Even if you accomplished this, the

government would step in and break up your monopoly. There are customers out there that you

just won’t get to have. So stop coveting your competitor’s customers, even if they used to be

your customers. You need to find your ideal customer niche, and then own that niche.

Losing customers by the boatload? Then, sure, you need to reevaluate your business. But do it on

your terms, not someone-else’s.

Be Unique

Keeping up with the competition is a losing play from the outset. You have a completely

different company. Different staff, different financials, different everything. So, if you try to

model your business after the success you think you see, without regard to your unique business,

you will be creating a monster. While you start to have some success, your internal engine will

get all gummed up, and you will eventually go down in flames. Instead, focus internally. Make

sure you have a solid company that can bring in sales, service those sales, and grow at a

sustainable pace.

Look for Weakness

Have a competitor always nagging at the edges, cherry-picking your best customers? Instead of

seeing their supposed strengths and trying to replicate, how about looking for their weaknesses?

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 You need to find chinks in the armor of your competitors. Then you can return the favor, on your

own terms.

If you want to win in business, you need to cut your own path. Don’t create a copy-cat company.

Be the leader and stand for what you stand for. Find your ideal customer niche and live and

breathe it. Look for weaknesses in your competitors and position yourself to be strongest in those

areas. Do all of this, have a good heart, and you will win.

Top 3 Ways to Beat the Competition

By Shari Waters

 competitive analysis
 competitive pricing
 increasing retail sales
It's inevitable that your retail business will have some form of competition. And while you can't
control what your competitors do, you can minimize their impact on your business. Here are
three ways to rise above the competition.
1. Reduce Expenses, Not Advertising
Take a look at your Profit and Loss statement, or itemize all of your expenses, and ask yourself
how each line can be eliminated or reduced. Find out where you can cut back. A little here and a
little there will soon add up. However, the one expense you do NOT want to reduce is
advertising. In fact, many retailers will increase their marketing efforts during slower sales
periods because there is more competition and fewer consumer dollars.
2. Get Creative
Retailers in the same industry generally use similar marketing methods to reach customers. Now
is the time to get creative and use unconventional marketing methods to distinguish your
business from the competition. A unique marketing campaign attracts more attention and lands
more sales. Also, look for some new untapped market you and your competitors overlooked.
You may uncover a niche market you can dominate with little or no competition.
3. Provide Outstanding Customer Service
By going the extra mile to provide good service, retailers can outlast the competition. Make
shopping in your store such a memorable experience that customers can't wait to come back or to
tell their friends. People like to shop where they feel comfortable and where they feel the owner
truly cares about their wants and needs

Competition exists whether you like it or not. Competition is a big player throughout all of our
lives from the school playground and graduating from university to finding a job and then
competing with other firms when we launch our own businesses.

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When considering competition, you shouldn't fear them. It's a very good thing to have
competition. It means there's clear demand out there for your products and/or services.
Competition is also helpful when you're looking to shape and improve your own company. It's a
natural aspect of the business world and one you should embrace positively.

But how do you deal with the competition? Here's some of my do's and don'ts on how to tackle
competitors:

Do know who they are

Research your competition to find out who's out there in your creative field. Consider their
strengths and weaknesses and figure out what it is that they're doing really well. Using your
research, you can make improvements to your own business and ensure you're offering the same,
if not better, level of product or service to your target market.

Don't bad mouth the competition

There will be many a time when someone will ask for your opinion about a competitor. That's
whether you're meeting a new client, networking with other firms or talking online. Whatever
happens, you should never ever bad mouth the competition. Ever. Period. Why would you even
want to in the first place? What would be the motives behind doing so? Be nice, be sincere and
don't revert to childish behaviour. And if someone is bad mouthing someone else to you?
Consider their motives and take their comments as a sign that they're not to be trusted.

Do embrace your competition

Although competition can be frowned upon, things have changed in recent years. Social media
and the Internet have opened up a world of collaborating, sharing and caring, making many
businesses more approachable, friendly and welcoming. I'm a strong believer that there's plenty
of work to go around, so believe it's better to embrace the competition and get to know them.

We've got lots of friends in business that also happen to be competition and find that our working
relationship is ideal. We pass each other work, go to similar networking events and look out for
each other. I know this might seem like a very idealist view of seeing things and that not all
competition will be as friendly, but trying to embrace competitors is a positive way of dealing
with them. Give it a try and send a friendly email to a competitor to introduce yourself.

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Don't copy, be inspired
It might be tempting to completely copy a fellow competitor who seem to be doing really well, in
the hope that you'll share some of their success, but don't do it! It will only be obvious what
you've done and extremely foolish, especially if the competition has been around for longer than
you. That's whether you copy the exact words on a competitor's website to add to your own or
even offer something unique that your competitor is already providing. Be inspired, don't copy.
Come up with your own original ideas and you'll be on the right track.

Do focus on yourself
Concentrate on your own business and put your heart and soul into it. Learn as much as possible
and never ever rest on your laurels. Keep pushing and striving for perfection. Always do your
very best and you'll go far to beat your competition. If you focus too much on the competition,
you'll forget what's most important - and that's your business. So be aware of the competition but
don't obsess about it. As Henry Ford once said, 'The competitor to be feared is one who never
bothers about you at all, but goes on making his own business better all the time'.

Don't get into price wars

Think that cutting costs and being cheaper than your competition will help you to beat them? It
probably won't, so stick to reasonable prices and don't undervalue your services. Besides, when
clients consider hiring you they don't just take into account the cost. They'll consider other
aspects like the quality of the products and services you provide. And, if you provide quality,
you'll be able to justify a higher price. And if you price yourself too cheaply? You risk putting
off some customers who will become suspicious of your prices or who would prefer to go for a
more expensive competitor for reassurance and peace of mind.

Do have confidence in your abilities

Competitors will always do well and they'll sometimes seem like they're impossible to beat. This
isn't the case, so stop doubting yourself and have confidence in your own abilities. There is work
out there and the only thing that's stopping you is yourself. Have confidence and get out there
and win business. Just because you think your competition might be better, that's no excuse to
think you're no good or will never succeed. Be bold. brave and embrace every opportunity you
can.

Don't follow
Are you tempted to do everything your competitors are doing? Keeping an eye on what they're
offering and then doing the same? It's more than likely that you've become a follower. And being

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a follower never really gets you anywhere. Try instead to become a leader. Have faith in your
own business plan and stick to it. Make decisions based on what's best for you and your
customers, not what's best elsewhere. Don't follow, lead!

Do understand that you can't win everyone

There will be many times when you lose out on business to someone else. Try not to take it
personally as you simply can't win every client that comes along. When you do lose out, be
humble and gracefully accept the decision. Don't - whatever you do - be rude or aggressive with
a client that went elsewhere. They might well come back to you in future if your competitor
turned out to be unreliable or let them down. Just remember to never ever burn bridges.

Don't play catch up all the time

If you're always chasing after your competition, trying to do exactly what they do in a pathetic
attempt to 'keep up', you'll be creating your own monster. Businesses are all different. If you're
trying to fit your entire model around someone else's company, you'll only set yourself up to fail.
It's much better to focus internally and build a business that is tailored specifically to your own
market and your own ethos and strategies.

Do offer something unique

When you've worked out what your competitor's weaknesses are, you can use this to your
advantage by finding a niche and specializing in a certain field. Once you've found your niche
service or product, go with it wholeheartedly and have confidence in your speciality. You'll soon
be fighting off customers with a stick. Also keep an eye on the industry you're working within to
adapt your services accordingly.

Take my own business, for example. Three years ago, I was surrounded by some excellent
traditional PR agencies and being only myself as a freelancer I didn't have a chance at competing
on the same level. But I recognized the growing impact of the digital revolution and changing
media landscape and its subsequent industries like public relations and marketing. That's when I
decided to specialize in digital PR and marketing. Although it was a leap of faith at the time -
especially when so many large agencies were dismissing social media as a 'fad' - it was the best
decision I ever made. One of my most recent clients hired my company on the strength of our
digital expertise.

So try to offer something unique that no one else is providing and make sure you're the best at it.

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How to Cope With Competition in Small Business
The Best Ways to Handle Your Competitors and Stay Alive in Business
Beating the competition is what business survival is all about. You're not just trying to get
customers, you're trying to get them before your competition gets them. There are 3 ways to beat
the competition in the business marketplace: specialize, adapt, or join the competition.
Specialize

Find a niche inside the industry itself. Specialize in one specific area of your industry. This is
how many hotels can survive in one market, because some cater to specific budgets or amenities.
There are high-end, mid-priced, budget, resort, and themed hotels. Specializing helps each one
stay alive. Be the cheapest, the best, or a specific theme or type of business in your industry.

Adapt

Look ahead to see if you can beat the competition to the next phase of your industry. Is your
industry shifting online, or moving to more high-end products? Get tuned into the market and
move quickly to beat them to the punch. Be the first to offer what your customers are going to
want next.

Join the competition

If you can't beat them, join them. Sometimes the best way to profit from your competitors is to
form partnerships with them. This is why most airlines have code sharing in markets they don't
serve well. It allows them to offer service to a wider market by adding other airlines' flights to
their own routes. You can do the same thing in your small business. Find a way to complement
each other, instead of beating each other into the ground.

For example, if you have a flower store chain and your competitor is taking half your business,
find a way to join with them to better serve the whole city. You can advertise together and each
take half the city for deliveries, one takes north and east, the other takes south and west.

1. LEADERSHIP
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Objective: At the end of this topic, the trainee will be able to identify appropriate
leadership behavior.

Importance

Good leadership is a necessity in any business organization. It is therefore, important that

the entrepreneur portrays appropriate leadership styles.

Key Points

A. Leadership Behaviour: A Good entrepreneur portrays certain leadership

behavior, such as : vision and foresight ;strong desire to influence others; ability to learn
from the past experience; high ambition, and imaginations, creativity and initiative and
good human relations.

B. Leading and Motivating Others: A good entrepreneur always endeavors to lead

and motivate workers by: raising workers self-esteem, providing information and
guidance, delegating authority and responsibility, rewarding good behavior, showing
(concern) to workers, and listening empathically.

C. Leaders Influence and Activities: Good entrepreneurs should impact influence

in their environments. They should be able to perform planning, organizing and
controlling and directing activities to be emulated and followed by others.

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 LEADING AND MOTIVATING OTHERS

Entrepreneurs are successful motivators of their employees. Some entrepreneurs motivate

by the sheer example of their hard work, but entrepreneurs who are high person-oriented
tend to be the most successful motivators. The following are some techniques that high
person-oriented leaders would use to motivate staff.

1. Build worker self-esteem. Build your employees confidence in themselves by

praising their good work and showing them that you expected their best efforts.

2. Inform employees. Try to tell your staff what you are trying to accomplish. Good
communication within the organization is essential to success.

3. Delegate authority and responsibility. Good leaders know how to delegate authority
and responsibility.

4. Maintain contact. Use your leadership ability to maintain contact with your
employees.

5. Apply reinforcement principle. You should reward behavior that you consider
desirable, because people tend to repeat rewarded behavior. Do not reward
behavior that you consider undesirable because people do not tend to repeat
behavior that is unrewarded.

6. Be an active listener. Active listening requires that you explicitly give feedback to
people speaking to you.

7. Set specific goals and continually review them. Set specific, clearly understood,
measurable goals.

8. Take corrective measures. When you must deal with some negative aspect of a
workers performance, you should talk to that worker in private. Never criticize a
worker in public.

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 MOTIVATIONS AND DRIVES OF AN ENTREPRENEUR

What is a motive or a drive?

It is a need that is sufficiently pressing to direct the person to seek satisfaction of the need while
a need becomes a motive when it is aroused to a sufficient level of intensity.

In human psychology it is realized when a person feels strongly that he is lacking something, that
person is bound to take a certain positive action so as to reduce or eliminate this felt deficiency.

That person is therefore motivated to act in a manner such that his need is satisfied. Therefore,
the forces that have moved that person to react in the manner he does are his motivations.

For a person to venture into entrepreneurship there must be the necessary motivations, the drives
that will enable him/her to persist in his entrepreneurial activities.

INTERNAL (INTRINSIC) MOTIVATION FACTORS

This refers to those personal traits and desires that induce a person to become an entrepreneur.
They include:

1. Self-Actualization: one of the powerful motivators that form the base of inner drive in an
entrepreneur. Usually a successful venture offers various forms of rewards in terms of
 benefits,
 identity
 and prestige.
 Having achieved the basic human needs, entrepreneurs become more confident in their
abilities, and realizing their capabilities of achieving more.

READ about Maslow’s motivation theory (Maslow’s hierarchy of needs)

2. Profit Maximization:
 the drive to maximize profit will make potential entrepreneurs work harder, be innovative
and even venture into other enterprises.

3. Desire to Succeed:

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 desire to succeed is an aspiration to achieve success towards one’s welfare to maximize pleasure
and happiness. This will give entrepreneurs public appreciation and recognition especially if they
have accomplished difficult tasks where others have failed. The desire and conviction for
continuance of family enterprises over generations has played a key role in motivating many such
family members to become entrepreneurs.

Needs Achievement (n-Ach)- is an individual’s desire for accomplishment:

Locus of Control : is a psychological concept that refers to how strongly entrepreneurs believe
they have control over the situations and their experiences that affect their lives.

4. Survival: an entrepreneur has to face many challenges, competition, internal and external forces.
To succeed entrepreneurs must strive to overcome these obstacles. This spirit of survival sustains
them through the challenging environment to achieve his goals.

5. Adventure: is a way of taking risks or challenges without knowing the end result. This gives a
potential entrepreneur the opportunity to explore new areas and opportunities and thus helps to
enhance his knowledge and innovativeness.
6. Independence/Self Reliance:
 an entrepreneur does not like being controlled by others.

 They have their original thoughts and ideas and generally do not conform to routines jobs
and practices. To satisfy their needs they seek opportunities that provide independence
where they set challenging goals and make efforts to achieve them. In such situations, they
become masters of their own activities and take full responsibility for the outcomes of their
own actions.

7. Power: is the desire to feel in total control of all situations. The ultimate satisfaction that power
brings can be a tremendous driving force behind the activities of an entrepreneur.

EXTERNAL (Extrinsic) MOTIVATION FACTORS

Entrepreneurial incentives at the nation level.

1. Credit facilities: lack of capital has always been a major bottleneck to start an enterprise.
Investment funds will be needed to purchase raw material machinery, equipment and other inputs.
Credit facilities will therefore assist an entrepreneur to acquire the necessary capital outlay to be
able to set up an enterprise.

2. Infrastructure: this includes building communication and services. Inadequate space to work in,
poor communication and inadequate provision of services create physical constraints to
entrepreneurs when implementing the ideas.

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 As such provision of proper infrastructure would reduce these constraints and thus become an
incentive to a potential entrepreneur

3. Exports and Import Incentive scheme: these are established government facilities used in
providing monetary concessions to entrepreneurs involved in the export and import activities.

Concessions on taxes, customs and excise duties, speed licensing with regards to exports and
importation of machinery equipment and raw material will have a direct effect reducing the
operating costs to exporters and importers.
This will reduce the cost of imported machinery and raw materials and encourage potential
entrepreneurs to set up enterprises & expand existing ones.

4. Pricing Policy: is the computation of the price of a given product in relation to the cost of its inputs.

An appropriate pricing system must take into account the total cost required for producing a
product or service whereby an entrepreneur is able to recover production costs and be left with a
reasonable profit margin which could be used to improve or expand the business. To remain in
business, entrepreneurs must be encouraged to produce and sell more on the market. The
availability of a steady market depends very much on a suitable pricing system

Read on:

 E-Commerce
 Online Marketing
 Hustler fund
 Activities of the new Ministry of Micro, Small and Medium Enterprise

MASLOW, HIERARCHY OF NEED

://www.indeed.com/career- https advice/career-development/maslow-motivation-theory

https://youtu.be/DZqeMb-1CgE?si=wDApAyePJGAB44Ng

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