Quantitative versus Qualitative Decision Making - Activity

Image: Decision making is a difficult process involving balancing a range of factors - some of them quantifiable and measurable but some of them unkown. Copyright: Thomas Aigner, stock.xchng

One of the features of any business is making decisions. How do you know you have made the correct decision? The answer is quite simple - you don't!

To aid decision making, businesses use a wide range of different methods. They will look at data - sales figures, sales forecasts and so on, information from market research, cost estimates, SWOT analysis, critical path analysis, investment appraisal techniques, decision trees and so on. Most of these can be described as quantitative methods - they have some sort of quantifiable data at their heart.

But making decisions just based on quantifiable data ignores many of the other factors that must be considered - potential for future development, qualitative market research information and not least the impact on human resource management of decision making amongst others.

The balance between these two is important to get right if the decision is to be made which advances the businesses objectives most appropriately. The skill for many business leaders is in judging what decision to make, what weight to place on the qualitative factors as well as looking at the long term success of the business.

This Activity looks at an example of the decision making process in terms of balancing quantitative and qualitative decision-making.

Scenario Image: Is the move to India for the call centre department viable if looked at from a qualitative angle? Copyright: Nik Frey, stock.xchng A major insurance firm based in the UK is considering transferring a range of functions to India. This is in pursuit of the company's strategies that include cutting costs and improving profitability. Included in this range of functions is the company's call centre, which provides assistance to customers on insurance claims and issues relating to policies and carries out various administrative jobs. The number of jobs being lost in the UK is 650, with only 25 of these being staff that will be asked to move to India to manage the project. This still leaves 3,000 staff in the three UK locations, although this will be the second time that the firm has announced cost cutting measures in the last two years - already 500 staff have been made redundant. The move will enable the firm to close certain parts at its existing locations and sell off the assets. The move has been looked at from a variety of angles. The move means that the firm can rationalise its office space with an estimated cost saving of £5 million per year. The investment in the office space and technology in India has a payback period of just two years. Research in India suggests the quality of the service in India is at least equal to that provided in the UK. The savings in wage costs amount to £12 million. The new call centre will be able to handle the expected rise in the volume of calls, which market research and past figures has estimated at growing at 15% per year. There are costs associated with the relocation but the firm expects to break even on the whole process within three years. The eventual change will increase profits by an estimated 2.5% over the next 10 years.

Things to Consider

The following are some ideas to guide you in your thinking - remember, there are rarely any right or wrong answers to these types of question. The assessment is based on your ability to present a coherent argument and how well you use appropriate business terminology and concepts in your answer.

• How will the firm present this decision to its staff?
• What effect will the decision (if it goes ahead) have on the motivation and morale of the staff?
• Should the firm be looking at why calls to the call centre are rising at such a rate in the first place (i.e. solve the cause of the problem)?
• What are the political and social factors associated with a possible move to India for the future?
• How reliable is the quantitative data that they might be using to inform their decision making?
• How might it affect public perception of the firm and what response could there be from trade unions?
• What will happen to the employees who will lose their jobs?
• Will the fact that this seems to be part of an ongoing cost-cutting exercise have any impact on reaction and response?
• Is there an alternative that would achieve the same outcome (or similar) without the same disadvantages?