Managerial Decisions and Organizational Performance

Pjp Ginting

Permanent Lecturer, Faculty of Economics, Mpu Tantular University, Indonesia

Abstract. Managerial decisions are made differently from individual

decisions. Managerial decisions are made by considering the objectives of the

organization and adjusted to the overall existence of the organization. Managerial

decisions have broad effects rather than individual decisions. In managerial

decision making is through delegation of authority. This delegation is done so

that managers can develop subordinates so as to further strengthen the

organization, especially when there is a change in management structure. In this

connection, of course the concept of organizational performance is able to

illustrate that each organization provides services to the community and can be

measured its performance by using existing performance indicators to see

whether the organization has done its job well and to find out its objectives have

been achieved or not.

Keywords: Managerial Decisions ꞏ Organizational Performance

1 Introduction

A manager must, continuously, make decisions. Decisions are made in order to solve

the problem. Decision making and problem solving is an ongoing process in terms of

evaluating organizational conditions or problems that arise, considering alternatives,

making choices, and actions needed as part of decisions. In one condition, decision

making can be concise. In other situations, the process can take weeks or months and

no decision has ever been made. The entire decision-making process depends on the

accuracy of the information available to the right people at the right time.

On another aspect, organizational performance is a picture of the work of the

organization in achieving its objectives which of course this will be affected by the

resources owned by the organization. The resources in question can be physical such

as human or non-physical resources such as regulations, information and policies, so as

to better understand the factors that can affect an organization's performance. The

concept of organizational performance also illustrates that each public

organization provides services to the community and can measure its performance by

using existing performance indicators to see whether the organization has carried out

its duties properly and to find out its objectives have been achieved or not.

Performance measurement is said to contain virtue values because performance

measurement is able to provide information whether the organization has succeeded in

achieving the desired goals or not. Organizations that carry out performance

measurements are said to be able to manage the organization well. (Sudaryo,

2015). Conversely, an organization that does not measure performance is said to be like

960

Ginting, P.

Managerial Decisions and Organizational Performance.

DOI: 10.5220/0010609800002900

In Proceedings of the 20th Malaysia Indonesia International Conference on Economics, Management and Accounting (MIICEMA 2019), pages 960-965

ISBN: 978-989-758-582-1; ISSN: 2655-9064

flying with eyes closed without knowing where the organization is going. (Poister,

2003)

2 Literature Review

2.1 Managerial Decision

Decision making in an organization is inseparable from what is meant by a

decision. According to Robbins and Coulter, the decision is to make a choice of two or

more alternatives. (Robbins, 2009)

The decision was made because there is a problem. Managerial decisions made

differ from individual decisions. Managerial decisions are made by considering the

objectives of the organization and adjusted to the overall existence of the

organization. Managerial decisions have broad effects rather than individual decisions.

3 Organizational Performance

Organizational performance is the functions of the work/activities that exist within the

organization that are influenced by internal and external factors of the organization in

achieving the goals set during a certain period of time. (Tika, 2006)

4 Discussion

A professional organization will not be able to realize a good performance management

without strong support from all components of the company's management and also of

course the shareholders. Because in the context of modern management a synergistic

performance will not be able to run optimally if the shareholder or the

commissioner companies only duty is to accept profit without care about various

internal and external problems that occur in the company.

Overall shows that managerial performance which is the ability of managers to

make plans, the ability of managers to achieve targets, and the gait of managers outside

the company, is actually related to the four characteristics of information consisting of

broadscope, aggregation, integration and timeliness, it's just that the magnitude of the

relationship varies depending on functions that must be performed by the manager.

To achieve the goals of an organization or company must implement the

implementation of performance management by managing cooperation in harmony and

integrated between leaders and subordinates. Performance management will be realized

if there is a relationship and desire that synergy between superiors and subordinates in

an effort to jointly realize the concept of performance management is to develop and

prioritize effective communication between various parties both within the company's

internal and external environment. To survive in today's competitive environment,

businesses must be able to create flexible and innovative business conditions, and

businesses must consider the company's external factors which are increasingly

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difficult to predict. The competitive advantage that can be created by the company can

be achieved in one of the ways, namely to improve managerial performance.

If we see some of the symptoms above, it is a sign that managerial ability of a lack

of information is a problem in team work. To be able to improve performance,

management must have the ability to see and use opportunities, identify problems, and

select and implement adaptation processes appropriately. Management is also obliged

to maintain survival (survival) and control the company (going concert).

On another aspect, efforts to improve the performance of public sector

organizations through the application of performance management is a necessity for the

organization to take strategic steps to improve the performance of the organization. The

implementation of performance management has been started since 1999 with the

launching of the conception of performance accountability in good governance of

government agencies with the issuance of Presidential Instruction No. 7 of 1999

concerning Performance Accountability of Government Agencies (AKIP). But until

now, the performance of government agencies has not been a major focus in governance

in measuring the success of a program or activity carried out by government

agencies. Management of government agencies, still focuses on the performance of

outputs (outputs) rather than outcomes (outcomes). For this reason, it has become

important for public sector organizations to implement management strategies to

connect the performance of public sector organizations with changing environmental

conditions.

According to Ibrahim (2008), strategic management in principle is the ability of

organizational management to adapt to the future which is generally short and medium

term. Strategy is important because it is a process to determine the direction that must

be followed so that the organization's vision and mission can be achieved. Strategies

can also provide a sound basis for decisions that will lead to the achievement of

organizational goals. Strategic decisions will increase the ability of leaders in dealing

with change.

In this connection, performance measurement is very important to assess the

accountability of organizations and leaders in producing better public services.

evaluating, controlling and improving procedures and processes, and to compare and

assess the performance of different organizations, teams and individuals. According to

Mahmudi (2007) the purpose of measuring the performance of organizations is as

follows:

1. Know the level of achievement of organizational goals

2. Provides employee learning tools

3. Improve the performance of the next period

4. Providing systematic consideration in making decisions regarding reward and

punishment

5. Motivate employees

6. Creating public accountability.

In general, the purpose of the performance measurement system according to

Mardiasmo (2004) is as follows:

1. Communicate strategies better by using the top down and bottom up methods.

2. Measuring financial and non-financial performance in a balanced way so that it

can be traced to the development of strategic achievements.

3. Accommodating the understanding of the interests of middle and lower level

managers as well as motivating to achieve the goal congruence.

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4. As a tool for achieving satisfaction based on an individual approach and rational

collective ability.

Mahsun (2006), stated several obstacles in measuring the performance of public sector

organizations, including:

1. The performance of public sector organizations cannot be judged solely on the

basis of financial ratios, because the aim of the organization is not to maximize

profits.

2. The output in the form of services is usually qualitative, intangible and indirect,

making it difficult to measure

3. Between input and output do not have a direct relationship (discretionary cost

center) because of the difficulty of setting standards as a benchmark of

productivity.

4. Not operating based on market forces so that there is no independent comparison

and require instruments to replace market mechanisms in measuring

performance.

5. Measuring heterogeneous community satisfaction from public sector

organization services is not easy to do.

Ministry of Foreign Affairs (Bruijn, 2002) stated the function of measuring the

performance of public sector organizations is as follows:

1. Transparency: organizations can make clearly what products they offer, how to

analyze the input-output, including the costs

2. Learning: the organization becomes a step further if it uses performance

measurement for learning, the transparency created teaches the organization

what virtues it has and where the possibilities for development are.

3. Appraising: Performance-based performance can be said to be a functioning

organization

4. Sanctioning: assessment can be followed by positive sanctions if it turns out that

the performance is good, and negative sanctions if the performance is poor.

Bruijn (2002), put forward various positive impacts of measuring the performance of

public organizations which ultimately have implications for strengthening strategic

management as follows:

1. Performance measurement leads to transparency. Performance measurement

provides insight to the organization about the main products, the amount of costs,

and also how the activities of the organization or certain parts of the organization

contribute to the output. Transparency can produce various forms of

rationalization, and may trigger internal discussions about how activities can

improve organizational performance. There are also clear guidelines on how to

assess new structures or procedures, especially how they can contribute to

improving organizational performance. The rationalization and development

process can start together over time as the organization can measure the existence

of its output.

2. Performance measurement is an incentive for output. Initially performance

measurement has an impact on output, and subsequently it will ultimately

contribute to organizational performance. Some research results that illustrate the

relationship between the introduction of performance measurement with an

increase in output have been carried out for example in a city government .

3. Performance measurement is an elegant way to create accountability. When the

task of public organizations becomes increasingly complex, the discourse of

autonomy becomes important and when autonomy is given, the implication is on

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accountability, accountability for its performance. Information about performance

is systematically measured and calculated so that it adds to the ability of certain

periods. Information is also easily communicated, and information can be provided

periodically every year.

Meanwhile, according to Mardiasmo (2004), performance measurement can be useful

for the following matters:

1. Provides an understanding of the measures used to assess management

performance.

2. Provides direction to achieve predetermined performance targets.

3. Monitor and evaluate performance achievements, and compare them with

performance targets and take corrective actions to improve performance.

4. As a basis for providing reward and punishment objectively for the achievement

of performance measured in accordance with the agreed performance

measurement system.

5. As a communication tool between subordinates and leaders in order to improve

organizational performance.

6. Help identify whether customer satisfaction has been fulfilled

7. Help understand the process of government agency activities.

8. Ensuring that decision making is carried out objectively.

In this connection there are performance indicators used to show the following results:

1. Effectiveness, seen from the suitability of the implementation of the tasks and

work with the results achieved and the suitability of the policy with the

implementation of the tasks and work in general are in accordance with the

provisions set. Awareness from each field of tasks and functions plays a major

role in the implementation of the tasks of each field.

2. Accountability, from the consistency between the tasks and functions of each

section with the activities carried out by the company and its accountability to

policy makers is still low because not all jobs can be accounted for. The granting

of authority is not on target and there is no direct accountability to the

community so that the community does not know the program of activities

carried out by the organization properly and directed.

3. Responsiveness, in terms of the level of understanding of the tasks and functions

in accordance with applicable regulations, the level of sensitivity of the work

tasks with the results achieved, and priorities for the tasks and work carried out

by each staff.

5 Cover

Based on the description above, it can be concluded that managerial decisions and

organizational performance are two terms that are mutually sustainable. In this

perception, performance measurement is very important to be carried out by the

organization because it can help improve the quality of resource allocation and other

managerial decisions and can facilitate data and fact based management for the future

by providing a basis for planning, as well as monitoring and controlling planning. In

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addition, performance measurement in managerial decisions and organizational

performance is also very important to increase accountability by making

responsibilities explicit and providing evidence of success or failure, and being able to

provide a systematic basis for assessing and motivating staff.

References

Bruijn, Hans de. (2002). “Performance Measurement in The Public Sector: Strategies to Cope

with The Risks of Performance Measurement.” The International Journal of Public Sector

Ibrahim, Amin. (2008). Pokok-Pokok Administrasi Publik dan Implementasinya. Bandung.

Refika Aditama.

Mahmudi. (2007). Manajemen Kinerja Sektor Publik. Yogyakarta.UPP STIM YKPN.

Mahsun, Mohamad. (2006). Pengukuran Kinerja sektor Publik. Yogyakarta. BP FE UGM.

Mardiasmo. (2004). Akuntansi Sektor Publik. Yogyakarta. Penerbit Andi.

Pabundu Tika, (2006). Budaya Organisasi dan Peningkatan Kinerja Perusahaan, Jakarta: Bumi

Aksara.

Poister Theodore, (2003), Measuring Performance in Public and Non Profit Organizations, John

Wiley&Sons,

Stephen P. Robbins and Mary Coulter. (2009). Management, 9th Editon (Uttar Pradesh: Dorling

Kindersley, 2009).

Sudaryo Yoyo, “Kinerja Perguruan Tinggi dengan pendekatan Balanced Scorecard” (studi pada

6 sekolah Tinggi Ilmu Ekonomi di Kota Bandung), Sosiohumaniora Vol 12, No 1, Maret

2015

Wilson, Alan. (2000). “The Use of Performance Information in the Management of Service

[ISSN 0263-4503].

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