Research: Customer Involvement in SME Decision Making

This report delves into the critical area of customer involvement in organizational decision-making within Small and Medium-sized Enterprises (SMEs). It begins with a comprehensive literature review, exploring the significance of decision-making in SMEs and the importance of customer contributions, supported by historical theories. The review covers SME decision-making processes, consumer behavior models, and various decision-making theories, including bounded rationality and the garbage can model. The research methodology, employing both qualitative and quantitative techniques with a case study approach, is discussed, detailing sampling considerations and data collection methods from SMEs in Sydney and Melbourne. The findings highlight the unique decision-making processes of SMEs, resource limitations, and the significance of customer feedback. The report also addresses gaps in existing research and concludes with recommendations for future studies. The analysis underscores the importance of integrating customer insights into strategic decision-making processes to improve business outcomes.

Research Title
Involving Customers in Organisational Decision making in SMEs
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Table of Contents
1) Literature Review Page 3
2) 1. Historical Theories Guiding This Research Page 3
a. 1.1 SMEs importance and their decision-making process Page 4
b. 1.2 Importance of customers and their contribution in decision-making process
of an organisation Page 4
c. 1.3 Consumer Decision-making Process Page 5
d. 1.4 Various theories of decision-making Page 7
i. 1.4.1 Bounded Rationality Model Page 7
ii. 1.4.2 Organisational procedure view Page 8
iii. 1.4.3 Garbage can model Page 8
iv. 1.4.4 Naturalistic Decision-Making Page 8
v. 1.4.5 Multiple Perspectives Approach Page 8
vi. 1.4.6 Effect of Speed on Decision-making Page 8
3) 2. Research Methodology Page 8
a. 2.1 Sampling consideration Page 8
b. 2.2 Data collection and analysis Page 9
4) 3 Findings Page 9
5) 4. Gaps Page 10
6) 5. Conclusion Page 11
7) References Page 12
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1. Literature Review
Understanding decisions is a crucial area of concern for the organisational researches and
scholars in the modern days and have been attracting researcher’s attention since decades.
David (2008) discussed that,decision making is regarded as the one of the most important
functions of management and many researches have highlighted decision making as the key
process of management strategy, especially when it is in context of Small and Mid-level
Enterprises (SMEs) (Nutt and Wilson, 2010). SMEs generally suffer financial crunch and
doesn’t have much funds to invest in R&D. So, if they pay much attention to strengthen their
decision making process they would gain lot from this process.To strengthen the decision
making process a lot of attention should be paid on customer contribution through their
feedbacks and viewpoints in strategic decision making process considering the fact that
customers are the reason behind the existence of organisations. The primary purpose of this
literature review is to analyze the importance of customer involvement in decision making
process and the secondary purpose is to build foundation of knowledge on organisational
decision making process of SMEs. This literature review has presented the similarities,
dissimilarities with the findings, methodologies, limitations and conclusions with the past
researches consulted while undergoing this research.This research is guided by below
provided research questions:
 What is the structure of decision making process in SMEs
 Does gathering customer data influence decision-making process of SMEs?
 What are the advantages of customer involvement in decision making processes? What factors might impede the organisational decision makers?
2. Historical Theories Guiding this Research
Since the inception of industrialization, there has been considerable theoretical and empirical
researches and studies on the importance of strengthening the decision making process.
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Realizing the importance and benefits of customers involvement in the decision making
process of an organisation, researchers have always guided the marketers to pay attention on
their customers and ask for their contribution by bringing them in the loop of decision
making process (Weinstein, 2012).
1.1 SMEs Importance and Their Decision Making Process
SMEs hold a very crucial and substantial position and contribute largely in the development
and growth of national economies. Despite their contribution in national economies, SMEs
are registering a high failure and exit rates and poor performance every year (Ahmad & Seet,
2009). Researches argue that the bad performance and failure is attributed to dynamic
changes in technology giving birth to competitiveness which requires best strategic decision
making process and this is the point where SMEs are lagging as they follow a very less
complex and few steps decision making process (Jocumsen, 2004).
1.2 Importance of Customers and Their Contribution in Decision Making Process of An
Organisation
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As noted by Kristin Smaby, “When customers share their story, they’re not just sharing pain
points. They’re actually teaching you how to make your product, service, and business better.
Your customer service organisation should be designed to effectively communicate those
issues.”
There are a dozen of factors which contribute to success and failure of an organisation and
customers are the prime factor. Organisations and marketers should never underestimate the
power of customers as they are the foundation of any business’s success. The most significant
goal of an organisation is identifying and meeting the needs of the customers and that can be
best done when customers are consulted and given place in the loop of decision making as
customers are the end user of the product and services and a part of the culture and market
where organizations attempt to sell their product (Makarewicz, 2013). Addition of customers
in strategic decision making loop is doubly advantageous for an organisation as it not only
fastens the decision making process but also motivates the customers towards the
organisation and it is very tough to change such motivation which is gained by the feeling of
being valued by the organisation. Customer feedback data is most crucial for any
organisation so is their participation in strategic decision making process because the need of
customer information applies to all the strategic decision making stages. Customer
participation in decision making provide information on their decision making reasons, the
loop holes of the product/services (Rudnicki, 2011).
1.3 Consumer Decision Making Process
The modern era of competitiveness and globalization strongly demand the upgradation of
decision making process because organisations have to pay heavily for the decision making
errors.None of the managerial function is possible without decision making. Consumers are
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revered as the king of the market and thus, their involvement in the decision making process
is very crucial and beneficial for the marketers.Decision making is a conscious selection of a
solution to a particular problem in a particular situation out of possible alternatives (Al-
Tarawneh, 2012). Decision making is a process which helps individuals, group of individuals
and teams to reach at the fulfilling options out of the alternatives available within an
organisation (Maringe, 2012). Almost all the definitions of decision and decision making are
closely similar to each other.
Kotler and Keller (2012) have defined five stages (mentioned in figure2) of consumer
decision making process and suggests all the marketers to deeply understand these stages to
succeed in marketing their products. Diagram of five stages follows:
Apart from these five stages, customers undergo psychological process before making any
purchase decision (mentioned in figure3) and get influenced by some factors before making
buying decision (mentioned in figure 4) below:
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1.4 Various Theories of Decision Making
At the initial stages of this research several theories of Decision making were studied in order
to grab the broadened understanding of the topic.This section discusses the main theories of
Decision making, Researches have broadly divided the decision making theories in two broad
categories, namely, analytic and the experiential. Both these categories generally follow 3
main steps in decision making, viz. 1) identifying and defining the problem, 2) Alternatives
identification, evaluation and selection, and 3) implementation of the alternatives. Most
commonly applied theories are mentioned hereunder:
1.4.1 Bounded rationality model: of Simon (1957) defines that due to lack of
thorough knowledge to calculate the advantages/disadvantages of the available alternatives to
a problem, decision makers settle for satisfying solution without fully attempting to analyse
the best possible solution (Hernandez & Ortega, 2019).
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1.4.2 Organisational procedure view:theory of March (1978) views the decision
making process as an outcome of standard operating procedure of organisations. Researchers
term this theory as avoidance mode assuming that a set procedure can hinder innovative
thinking ability.
1.4.3 Garbage can model:of Cohen et al. (1972) is an irrational model of decision
making and assumes that lack of organisational processes for finding alternatives and
decision-makers do not have any connection with the problems and its solutions and that the
decision-makers in the organisation changes frequently creatinga chaotic situation which
arises unnecessary solutions called organisational garbage.
1.4.4 Naturalistic decision making:theory proposed by Klein (1999) states that the
experience of the decision maker, more the number of years of experience better would be the
decision as the problem could be detected sooner.
1.4.5 Multiple perspectives approach:Mitroff and Linstone (1993) proposed that
despite the exhaustiveness of decision making process there always exists the probability of
adulteration because of the different viewpoints of decision-makers involved in the process
and suggest to consult various decision makers to achieve a comprehensive decision.
1.4.6 Effect of speed on decision making:As argued by Kedia et al. (2002), the
decision making process should be faster as it increases the chances of profitability
2. Research Methodology
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Towards the understanding of the significance of involving customers in the decision making
processes in SMEs, there was utilization of both qualitative and quantitative research
techniques as well as holistic case study approach. Application of deductive approach in the
research methodology was useful to enable hierarchical penetration and hence effective data
collection necessary for evaluation. The selected research methodology enabled the
realization of the issues of strategic decision making that would involve both customers and
owners of SMEs.
2.1 Sampling Consideration
20 Small-scale enterprises from Sydney and 25 Medium-scale companies from Melbourne
were selected for sampling purpose. Top-management employees, like CEOs/CFOs,
Marketing-heads and other key persons of the management were interviewedconsidering they
could best shed light on the decision making process. 5 junior-level employees from each
organisations were also interviewed on their respective work stations to measure the impact
of decision making. Apart from this, 10 questionnaires were distributed in each company to
be filled by the top and lower-management employees. Out of 450 questionnaires distributed,
only 400 completely filled questionnaires were collected.
2.2 Data Collection and Analysis
The research was carried with the help of case study survey of 45 SMEs of Sydney and
Melbourne chosen randomly.Questionnaires were prepared focussing on the activities and
steps involved in strategic decision making process and as guided by Nutt (2011) and
questions were developed considering decision makingan action-taking process. Personal
interviews were also conducted in order to understand the effect of decision making process.
Closed ended questions were asked with the help of questionnaires and interviews. Important
data were filtered from the questionnaires with the help of excel sheet and then these
information aided in forming pie charts, graphs and tables for deeper analysis of the topic.
3. Findings
According to Hellriegel
& Slocum (2009), organizational culture can enhance performance in a large scale if it can
be understood that
what sustains a culture. According to these authors the culture of an organization allows the
employees to be
acquainted with both the firm’s history as well as current methods of operation and this
specific detection
According to Hellriegel
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& Slocum (2009), organizational culture can enhance performance in a large scale if it can
be understood that
what sustains a culture. According to these authors the culture of an organization allows the
employees to be
acquainted with both the firm’s history as well as current methods of operation and this
specific detection
The first and foremost thing that became highlighted while conducting this research was the
unavailability of ample research on such an important topic ‘Involving Customers in
Organisational Decision making in SMEs’. Although there are few researches on the decision
making process of SMEs but very few researches have been conducted on the topic.
However, there are numerous researches on the importance of customer/consumers from
marketing perspectives but there is only handful of studies on such crucial research topic. The
primary finding of the research suggested that the decision making processes of SMEs are
different from large scale organisations. This finding stood similar to the findings of
Gustafsson, (2009) who argued that SMEs follow completely different decision making
protocol, structures and tools from their larger counterparts and therefore, decision making in
SMEs has a tendency to not follow the standard theories of rational decision making. Existing
researchalso found that SMEs undergo a pressure of limitations of resources (funds/human
resources) and the decision making processes are unpredictable. Likewise, Kort and
Vermeulen, (2008) stated that, due to lack of resources, biasness, heuristics and intuition are
often regarded in strategic decision making. Paralleling this finding, Curseu, Vermeulen and
Bakker (2008) too argued that the strategic decision making process in SMEs are
unforeseeable and random. The most surprising finding of this research stood that SMEs
generally followed a three step process in decision making, problem-solution-analysis
structure. This finding is quiet similar to the findings of Xueli and Calvin (2012), who stated
that decision makers of SME follows a two-step progression of problem-solution-analysis
instead of problem-analysis-solution done by large scale industries.
The secondary finding of the research highlighted the importance of customer’s involvement
in decision making processes and found that the customer data highly influenced the decision
making process, if utilized properly and reviewed before making strategic decisions. This
finding shared similarities with many previous researches, viz. McFarlane (2013), who
described customers as the most valuable long-term strategic partners, who proves to be very
beneficial at all stages of decision making and thus advices the organisations to understand
the role of customers in strategic decision making.SMEs face financial crunches and have to
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operate without much investment in R&D, so, taking advantage of their customer-database
can serve them the purpose of costly and outsourced strategists/thinkers. The findings in the
current research were parallel to the study conducted by Dovaliene and Virvilaite (2008) who
studied on ‘Customer value and its contribution to the longevity of relationship with service
provider’.
4. Gaps:
Due care was taken to carry out this research smoothly and effectively, despite that, this study
held some limitations. Although two cities of Australia where many offices are located were
chosen to carry this research, despite that, it became a gap of this research because only one
type of industry was selected from one city, that is, 20 Small-scale companies from Sydney
and 25 Medium-scale companies from Melbourne. Research should have concentrated on
selecting both small scale and medium scale organisations from both the cities. Random
selection of organisation would have provided a more feasible data and authentic
result.Another gap of this study remained its overdependence on interview sessions, which
shows iceberg effect while utilizing interviews as a tool. Interviewers all the time doesn’t say
what they actually mean and their body languages totally differs from their words in many of
the questions asked, therefore the data which was supposed to be collected at face value was
beyond the control/scope of interviewer and thus couldn’t till beneath the iceberg. Moreover,
lower-employees were interviewed on their respective work-stations which marked a
limitation as lower-staff doesn’t have separate cabins where they can openly discuss the
impacts of decision making processes and thus they might have not answered questions
rightly.
5. Conclusion
Although there are few researches on the decision making process of SMEs but much
attention is not paid on the topic. There are numerous researches on the importance of
customer/consumers from marketing perspectives but there are only few researches on the
involvement of customers in decision making process of SMEs. Despite holding so much
importance this research topic has not been studied extensively, this limitation provides gap
for future researchers.
To conclude, decision making being a skill can be improved by increasing experience and
risk taking appetite. Decision making process of the SMEs are uncertain and faces biasness,
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heuristics and intuitions. SMEs would benefit a lot from the involvement of customers in
their decision making process and detailing the decision making process. The involvement of
customers in strategic decision making will not only improve their decision making process
but also lessen their burden of resource limitations (Ahmad & Seet, 2009).
6. References:
Ahmad, N. H., & Seet, P. S. (2009). Dissecting behaviours associated with business failure:
A qualitative study of SME owners in Malaysia and Australia. Asian Social
Science, 5(9), 98-104.
Al-Tarawneh, H.A. (2012). The Main Factors beyond Decision-making. Journal of
Management Research, 4(1), 1-23. DOI: 10.5296/jmr.v4i1.1184.
Cohen, M.D., March, G.J. & Olsen, J.P. (1972). A Garbage Can Model of Organisation
Choice. Administrative Science Quarterly. 17(1). 1-25. DOI: 10.2307/2392088.
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