A Study of Contextual Factors Affecting Organizational Decision-Making

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Management and Business Context

Introduction
The contextual factors play an important role in organizational decision making. The
environmental forces include forces such as customers, competitors, employees, the board of
directors etc. All the environmental factors need to be considered and all the organisational
decisions should be taken according to that only. The risks confronting the firms also need to be
considered while taking decisions so that the management can take actions to avoid or minimise
the impact of the risks. Governance and structure of the organisation make the decision to be
made as per the governing rules set by the management of the organisation. The structure of the
organisation also affects the decision-making process as the decisions are made and followed
based on the managerial structure of the organisation. Organisation and business practices are
used to make decisions as they guide what decisions need to be taken based on the business
practices followed by the organisation. Diverse firms have diverse functions, which makes the
decision-making process much diverse.

Shaw, D. (2017). Managing people and learning in organisational change projects. Journal
of Organizational Change Management, 30(6), 923-935. DOI: 10.1108/JOCM-11-2016-
0253. Retrieved from:
https://www-emeraldinsight-com.ezproxy.cqu.edu.au/doi/full/10.1108/JOCM-11-2016-0253.
Business organisation structure simplifies the process of decision making. An organisation chart
provides a hierarchy of authority which starts with the chairman, CEO and including other senior
executive officers at the top because they only set the goals and objectives of the organisation.
The managers under the level of executive officers are provided with the task of applying the
goals within their areas of responsibility, arranged according to the flow of information in the
management. The organisational structure further helps in enhancing performance by creating
specialisation within the various departments of the organisation and assigning authorities based
on the specialisation of the managers and other employees. This helps the manager in taking a
perfect decision in their respective specialised sector and also makes the employees deliver the
best performance. Dividing the proper structure of an organisation provides separate decision
make for each specialised unit which helps in taking a proper decision based on needs and
requirements. Organisational structure divides the operation of the organisation into specialised
departments which provides the managers of that particular department with the power to deal
with problems and create efficiencies in the process and production of their particular
department. It promotes efficient decision making within the department and the efficient
operation of the organisation. The organisational structure further encourages filtered
information flow among all levels of management as well as various departments. A filtered flow
of information from production level allows the management to take decisions focusing on the
goals of the organisation.

Wang, Mcnally, &Lenihan. (2019). The role of social capital and culture on social decision-
making constraints: A multilevel investigation. European Management Journal, 37(2), 222-
232. DOI: 10.1016/j.emj.2018.04.004. Retrieved from: https://www-sciencedirect-
com.ezproxy.cqu.edu.au/science/article/pii/S0263237318300501?via%3Dihub.
In an organisation, every managerial action including the decision-making process is influenced
by the environmental forces. A business environment consists of the external environment and
internal environment, both including various factors influencing the decision making of the
organisation.
A brief description of the external environmental factors, as well as the internal environmental
factors and their influence, is provided below.
External environment
External environment consists of various factors such as:
Competitors: Decisions of an organisation are mainly influenced by the competitors. Based on
the decisions taken by the competitors and the quality of products and services provided by them
the organisation always tries to take decisions to go further ahead of their competitors.
Customers: Providing satisfaction to the customers is the ultimate goal of any organisation.
Customers are the people who provide the organisation business opportunities and help them
earn the profit. Every decision made by the organisation is made by focusing on the needs and
requirements of the customers.
Internal environment
Internal environment consists of various factors which are as follows:
Owners: Owners are the people who have invested in the organisation and have property rights.
The owners have the rights to change the decisions of the organisation and thus all the decisions
making process is influenced by the decisions of the owners.
Employees: Employees are the most important element of the organisation. Employees are the
one who performs the daily tasks. Thus employees are the most influential factors of the internal
environment for the decision making process.

Musallam, S. (2018). The direct and indirect effect of the existence of risk management on
the relationship between audit committee and corporate social responsibility disclosure.
Benchmarking: An International Journal, 25(9), 4125-4138. DOI: 10.1108/BIJ-03-2018-
0050. Retrieved from:
https://www-emeraldinsight-com.ezproxy.cqu.edu.au/doi/full/10.1108/BIJ-03-2018-0050.
The risk is one of the most essential components of organisational decision making. While
making organisational decisions the management faces uncertainty. The risk is the factor which
leads to an undesirable outcome. If the probability of an event or risk is predicted it will change
the decision made for that event. Every decision contains some risk, some decisions are less
risky and some are more. Risk and decision making are both interrelated and relates to various
uncertainties. For making perfect decisions regarding any event, various trials need to be done to
predict the risk and its influence. In the case of a single trial, the possibility of risk and its effect
on the decision making rises. Analysing the risk factor helps the management in deciding
whether to continue with the decision of no risk with low profit or to go for high profit with a lot
of uncertainties. A large investment consists of huge risk, thus to maximise the profit the
management has to take decisions consisting of high risks. The management has to deal with a
high level of both the project as well as the risk. Thus the project manager needs to do a proper
investigation of all the events which provides that the manager propensity take or to avoid risk
affect the decisions made and also decides the success or failure of the project. The most
important thing is to do proper analysis and ability to respond to future uncertainties which have
a great influence on the decision making process.

Kattman, B., Corbin, T., Moore, L., & Walsh, L. (2012). Visual workplace practices
positively impact business processes. Benchmarking: An International Journal, 19(3), 412-
430. DOI: 10.1108/14635771211243021. Retrieved from: https://www-emeraldinsight-
com.ezproxy.cqu.edu.au/doi/full/10.1108/14635771211243021.
High business practices are the defining ability to make good decisions. Effective business
practices help in making effective business decisions. Good decision making is also one of the
practices that the organisation should focus on. With the growth of the organisation, employees
make decisions in an uncertain environment. Formal business practices help the employees in
taking business decisions that are meaningful and beneficial to the organisation and also meets
the values and norms of the organisation. Business practices help in understanding the support
that will be received from the management for the decision taken and also helps in determining
the effectiveness of the decision. According to former decision-making business practice, CEOs
of the organisation rely on control practices to make sure that the decisions made by the
employees are according to the vision and values of the organisation. This helps the employees
in taking more relevant decisions and follow more efficient practices of decision making than
before. This practice followed by the organisation helps in making sure that the decisions made
help the organisation in giving higher performance and growth with a low level of risk. In
today’s competitive market customer only pay value-added services instead of paying for
ineffective products and services. Ineffective decision-making practices lead to customers losing
interest in the products and services and competitors taking advantage which eventually results
in the downfall of the organisation in the competitive market.

Kagzi, M., & Guha, M. (2018). Does board demographic diversity influence firm
performance? Evidence from Indian-knowledge intensive firms. Benchmarking: An
International Journal, 25(3), 1028-1058. DOI: 10.1108/BIJ-07-2017-0203. Retrieved from:
https://www-emeraldinsight-com.ezproxy.cqu.edu.au/doi/full/10.1108/BIJ-07-2017-0203.
A positive linear relationship exists between the diversity of the firm and the decision making
process. Diverse functions of a firm provide a single firm performing a lot of functions. Thus
having diverse functions means that the management has to take diverse decisions as well which
will include taking decisions for each particular function it performs. Focusing on diversity
means taking more decisions for hiring. Having diverse services means that the organisation
have a diverse workforce and thus the management needs to take proper decisions to manage all
needs and requirements of the whole workforce along with focusing on the proper completion of
the tasks assigned to each of the employees. The management needs to make proper decisions
regarding allotment of resources and workforce to the desired functional area. Each specialised
unit is managed and directed by its own decision maker, who has a piece of proper knowledge
about the problems and needs of that unit. This also allows a filtered flow of the information
from one functional unit to another with proper direction. This assists in the decision making the
process by focusing on desired results rather than focusing on individual management of each
function. The diverse function also makes the management to take a decision regarding the
direction of the flow of information among each department to prevent any kind of uncertainties
and loss of information.

Conclusion
In the following research, a successful study is made on the five contextual factors in the
organisation which includes organisational structures or governance, environmental forces, risks
confronting the firm, organisation and business practices and the functions of diverse firms. As
per the researcher Environmental forces is the most recommended contextual factor important to
the organisational performance of the Big Four banks that are the Commonwealth Bank of
Australia, Westpac, Australia and New Zealand Banking Group or the National Australia Bank.
Environmental forces play a major role as they include all the internal factors and the external
factors that affect the performance of the organisation. With the external forces, the organisation
is able to get information about the competitors and making decisions based on that which will
help in gaining competitive advantage. Focusing on the needs and requirements of customers
will help the organisation in making a positive influence on the customers and will increase the
loyalty of the customer towards the organisation. Focusing on internal factors which includes the
employees will help the organisation take decisions which are beneficial for the employees. It
will make the employees give their best performance which will increase the quality and quantity
of the production.

References
Shaw, D. (2017). Managing people and learning in organisational change projects. Journal of
Organizational Change Management, 30(6), 923-935. DOI: 10.1108/JOCM-11-2016-
0253. Retrieved from:
https://www-emeraldinsight-com.ezproxy.cqu.edu.au/doi/full/10.1108/JOCM-11-2016-
0253.
Wang, Mcnally, &Lenihan. (2019). The role of social capital and culture on social decision-
making constraints: A multilevel investigation. European Management Journal, 37(2),
222-232. DOI: 10.1016/j.emj.2018.04.004. Retrieved from: https://www-sciencedirect-
com.ezproxy.cqu.edu.au/science/article/pii/S0263237318300501?via%3Dihub.
Musallam, S. (2018). The direct and indirect effect of the existence of risk management on the
relationship between audit committee and corporate social responsibility disclosure.
Benchmarking: An International Journal, 25(9), 4125-4138. DOI: 10.1108/BIJ-03-2018-
0050. Retrieved from:
https://www-emeraldinsight-com.ezproxy.cqu.edu.au/doi/full/10.1108/BIJ-03-2018-0050.
Kattman, B., Corbin, T., Moore, L., & Walsh, L. (2012). Visual workplace practices positively
impact business processes. Benchmarking: An International Journal, 19(3), 412-430.
DOI: 10.1108/14635771211243021. Retrieved from: https://www-emeraldinsight-
com.ezproxy.cqu.edu.au/doi/full/10.1108/14635771211243021.
Kagzi, M., & Guha, M. (2018). Does board demographic diversity influence firm performance?
Evidence from Indian-knowledge intensive firms. Benchmarking: An International
Journal, 25(3), 1028-1058. DOI: 10.1108/BIJ-07-2017-0203. Retrieved from:
https://www-emeraldinsight-com.ezproxy.cqu.edu.au/doi/full/10.1108/BIJ-07-2017-0203.