Qualitative Decision-Making approach

Decision making is a tough process especially if the issue on hand is

complicated and the significance of the outcome has major consequences to
the stakeholders. Decision making is a five step process: recognition of a
situation that requires a decision; identification and development of
alternative courses of action; evaluation of the alternatives; choice of one of
the alternatives, and implementation of the selected course of action.
Quantitative decisions are mostly based on statistical analysis of collected
data whereas qualitative decisions are based on many algorithms like type
and quality of data, factors that influence collected data, risk assessments etc.
It is a more in-depth evaluation of information taking into account all
possible factors that affect a given scenario not just the numerical data value
to reach a decision.
Quantitative factors are numerical basis for decision making; effect of
decision on stakeholders and their response; investment appraisal; break-even
analysis; market research; sales forecasting; critical path analysis an decision
trees. Qualitative factors take into account other issues that may influence
outcome of a decision like SWOT analysis (Strength Weakness Opportunities
Threats); Human Resource Management issues like motivation, morale,
retention etc; PEST (Political Economic Social Technological); Publicity and
public image; long term survival/development issues and stakeholder
analysis.
In conclusion, quantitative decision is based on clear numerical statistical and
quantifiable data without consideration to any other factors. Qualitative
decision is more subjective not just based on the numerical statistical data but
other associated factors that may have some or major influence on the
collected data. It is a more in-depth analysis of all possible factors that can
affect the decision making process. It has the comprehensive understanding
of the analyst who is an active participant compared to quantitative decision
where the analyst is the mere dispassionate investigator of discrete variables.

What are qualitative factors?

Qualitative factors are outcomes that you cannot quantify with hard data. Although
numerical data is not used to measure them, qualitative factors are still incredibly
influential because they represent the way the public perceives a business and its
operations and how that perception can affect the bottom line.
For example, although the influence of a new logo—a qualitative factor—on a
company's profits during a specific quarter may not be immediately tangible, you can
clearly expect how an increased labor expenditure may affect the profits and revenue.
The new logo might attract an entirely new demographic of potential buyers, increasing
profits and stimulating growth, just as an increased labor expenditure would allow for
more sales to go through.

Examples of qualitative factors

There are many qualitative factors that, despite being difficult to measure with numbers,
can hold a powerful influence over a business and its profits, including:

Brand reputation

A business' or company's brand makes it stand out, whether that is through a creative
visual design, a defining ideology or a mix of both. The decisions a business makes
influence their reputation to the public and their target audience as a business or
organization. Making decisions that reflect positively on a brand can increase trust in its
products or services and promote growth. An organization that updates its visual style,
for example, might find that customers feel a renewed sense of confidence and trust in
their product as a result.

Employee morale

Employee morale describes the overall outlook of employees on their workplace.

Depending on the level of employee morale in a job, their productivity may fluctuate,
which influences overall output and performance. Morale is higher when employees feel
encouraged and motivated at work, leading to higher productivity and better work
performance.

For example, if you are considering expanding your office space, it may seem intuitive
to go with the most economically efficient plan available. However, considering the
needs of the employees and catering some of your decisions to what will boost their
morale may ultimately have a more positive influence on productivity.

Product quality

The quality of a product reflects the materials a business has chosen to work with and
the creative process that goes into the final product. The higher the quality a product is,
the more likely it is to draw the attention of potential customers. Considering the quality
of the materials you are purchasing—and the desired quality of the finished product—
can help you make decisions that are in the best interest of the business and its
expected revenue.

A shoe seller looking for new leather, for example, might have to decide between a
higher-quality leather that's more expensive or lower-quality leather that's cheaper.
Choosing the higher-quality leather makes their shoes stronger and sturdier, which can
increase sales and stimulating interest in their product.

Customer satisfaction

Customer satisfaction is the overall fulfillment customers feel about a product or service.
The opinion of the customer—and the ability to keep them interested in a product—can
have a positive influence on a business's or organization's longevity and sales. The
more a business can satisfy its customers' needs, the more likely they are to return for
the product or service in the future and feel loyal to what they are producing.

Implementing programs targeted at improving the customer's experience, whether it is

through an expanded customer support team or a new rewards program that promotes
brand loyalty, can inspire customers to feel more connected and satisfied with a
company or product, and therefore, can help boost sales.

Investors

Because investors are some of the most influential stakeholders maintaining a

business, their opinions regarding the business or product can help guide the direction
the organization grows in. Who they are, what their business background is, and how
they feel about business decisions can influence the direction the organization grows in.

For example, if the business is looking to expand into new markets, they can focus on
markets investors would be more receptive toward, which can increase their satisfaction
and loyalty.

Competitive advantage

A product or service that has a competitive advantage has differentiated itself in its
industry and is more appealing to consumers. Acclimating to new technologies and
embracing changes for a product can increase a company's competitive advantage in
the marketplace and allure new customers.

Keeping a product modern helps it stand out as a unique product or service consumers'
needs. For example, a dry cleaning business might decide to create an online
application that helps customers keep track of their clothing and provide alerts and
notifications for pick up, increasing both comfort and convenience. This gives the dry
cleaning business a competitive advantage that they would not have had otherwise, and
their business is likely to see growth.

Community

Depending on where the business is located, what the business does and how it
operates, the impact of individual choices on the surrounding community can influence
their perception of the organization and its reputation as a whole. How individual
decisions reflect on the business' or organization's community can help employees
make the most beneficial positions with regard to local operations and find ways to
serve the community.

For example, an organization may allow employees to devote time to take part in
volunteer efforts within the community. This can have an increasingly positive impact by
demonstrating a business's commitment and encouraging community members to learn
more about what it is it does.

Management

Depending on the structure of the organization, management teams are likely to be very
influential in their relationships with other employees and customers. Maintaining a
healthy relationship between management and employees as well as between
management and consumers can help make sure that the target demographic trusts
company leadership just as much as they trust the company's product or service.

A business with a stable leadership team, for example, may find that changes in internal
policy are easier to make because of the trust that they have established. Keeping
these factors in mind when making business decisions can lead to positive changes for
the business.

Relationships

The relationships you foster with other businesses, vendors or stakeholders can
strengthen a company's professional network and raise its reputation among like-
minded individuals. The influence of a manager's or executive's decisions on their
professional relationships can guide the decisions they make and boost the business'
growth in the long term.

For example, a small business owner who primarily sells their products at a farmers
market may find that maintaining positive relationships with other vendors strengthens
their business and visibility. This can influence them to continue to focus their efforts on
selling in that area and therefore strengthen those relationships, leading to other
opportunities with those professional contacts as time goes on.

Relevance

Prioritizing relevance helps keep a company and product or service in the minds of its
consumers. Maintaining relevance can also help you firmly establish a product or
service among the target audience, leading to consumers reliably going to that business
whenever they need a particular product or service.

A business that regularly updates their advertising materials, for example, may find that
their outreach is consistent with any new products, therefore increasing their relevance
and establishing their worth.
Qualitative vs. quantitative factors
Quantitative and qualitative factors are both used to analyze the risks associated with
business decisions and are influential for predicting and analyzing a business's growth.
However, there are a few key differences between the two.

Qualitative factors are those that data cannot easily quantify or measure. These factors
rely on subjective knowledge that comes with understanding the ins and outs of a
business and how outside variables can affect them.

Quantitative factors, such as a cost-benefit or trend analysis, provide quantifiable

evidence to guide managerial accountants in developing their strategy. These methods
rely on hard data and formulaic equations in order to calculate the many ways in which
a business decision can be profitable.