Three Qualitative Factors That Would be Important For Management Decision-Making
As stated by Heisinger & Hoyle (n.d.) it is common knowledge that business decisions are data-driven and primarily examine quantitative financial facts emphasized by accounting differential analysis. However, understanding qualitative factors also can support the company to be better in analyzing the factors that contribute to its success, leading to stronger and more stable growth overall (Indeed Editorial Team, 2021).
According to Indeed Editorial Team (2021), qualitative factors are outcomes that cannot be quantified by objective facts. Although numerical data is not utilized to quantify them, qualitative elements are nonetheless extremely relevant since they represent how the public sees a company and its activities, as well as how that impression affects the bottom line. In this matter, it is obvious that companies should consider the qualitative factors into their decision-making process.
Three Qualitative Factors That Would Be Important For Management Decision-Making
Qualitative variables are decision results that cannot be assessed but do have an impact on the values of the organization (Accounting Tools, 2022). In general, managers make decisions based on applicable expenses and revenues. Managers estimate future expenditures and income through precise actions. In certain cases, qualitative reasons outweigh the immediate economic rewards of a decision.
In my opinion, below are the three most important qualitative factors for management decision-making (Indeed Editorial Team, 2021):
- Customer Satisfaction: Customer satisfaction refers to how satisfied customers are with a product or service. The customer’s opinion can have a favorable impact on the lifespan and sales of a business or organization. The more a company’s ability to meet its customers’ requirements, the more likely they are to return for the product or service in the future and feel loyal to what it produces.
- Quality of Product: The quality of a product is determined by the materials used and the creative process that goes into the final product.The better the quality of a product, the more probable it is to attract potential clients’ attention. Consideration of the quality of the materials purchased, as well as the intended quality of the completed product, can assist the company in making decisions that are in the best interests of the business and its projected income.
- Employee morale: Employee morale indicates an employee’s general attitude toward their workplace. Employee morale in the workplace can affect productivity, which in turn affects total production and performance. Employee morale rises when they are encouraged and inspired at work, which leads to increased productivity and better job performance.
A Situation Where The Qualitative Factors Would Outweigh The Quantitative Results
Let’s say we want to do a differential analysis of the make-or-buy decision for a company. According to the article written by reference.com (2020) when a company decides whether to make or buy a product, it must consider qualitative factors such as the lives of employees who would be laid off if the product was outsourced, the time constraints involved in getting outsourced products delivered, and whether or not an outsourced product would meet the company’s standards.
In terms of qualitative factors, the firm must ultimately value the quality of its product as well as the quality of its employees and work environment. It is simple to ensure that a product has the necessary dimensions and parts if it is manufactured within the firm that requires it, yet it is occasionally cheaper to outsource the product. Similarly, if the product is created by a business that specializes in that item, the quality is likely to be significantly greater. While the quality of the products is crucial, so is the quality of the workers’ life. When a product is outsourced, it frequently means that some employees within a company will no longer be needed and will lose their jobs. In this instance, a corporation must consider if outsourcing the product is worth the loss of employees. In this case, the qualitative factors outweigh the quantitative results.
My Personal Experience
I have been working in a small (start-up-like) IT company in Osaka, Japan since 2019. Our main business activities mostly software development, website development, mobile app development, data analysis consulting, and IoT system planning and development. Sometimes we need to choose whether we need to make the product by our team in Japan or outsource the project to our software house partners in Indonesia. Most of the cases, even though the quantitative results show it will be cheaper if we outsource the project to Indonesian software houses, we choose to develop the product by our team to protect our customers’ satisfaction.
Conclusion
Companies should examine qualitative elements in their decision-making process. Qualitative factors, depending on the management and the quantity of investment required, might be the determining factor in whether to engage in a certain activity. We need to realize that the choices or actions made by executives or managers have a direct impact on an organization’s performance and efficiency.
References
Accounting Tools. (2022, June 6). Qualitative factors definition — AccountingTools. AccountingTools. Retrieved July 13, 2022, from https://www.accountingtools.com/articles/qualitative-factors
Heisinger, K., & Hoyle, J. B. (n.d.). Accounting for Managers. https://2012books.lardbucket.org/books/accounting-for-managers/index.html
Indeed Editorial Team. (2021, February 23). What Are Qualitative Factors? Indeed Career Guide. Retrieved July 13, 2022, from https://www.indeed.com/career-advice/career-development/qualitative-factors
Reference.com. (2020, April 10). What are the qualitative factors to be considered in a make or buy decision? Retrieved July 13, 2022, from https://www.reference.com/business-finance/qualitative-factors-considered-make-buy-decision-cfe78a3474d1335b
Walther, L. M. & Skousen, C.J. (2009). Managerial and Cost Accounting. https://library.ku.ac.ke/wp-content/downloads/2011/08/Bookboon/Accounting/managerial-and-cost-accounting.pdf
Note:
This article is written based on University of The People Managerial Accounting (BUS 5110) written assignment by Fristy Tania in July 2022
