Decision-Making in Contemporary Management

Decision-making is one of the main concepts and practices used by organizations to grow and develop their strategic position. Good managers do much more than make good decisions, a broad view of the decision-making process provides a useful starting point from which to understand what groups must do. As managers and entrepreneurs, we should have confidence in our decisions, but it is a difficult task because of the turbulent market environment and changing economic conditions.

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It is difficult for a manager to be confident in his decision-making because a hallmark of the modern business environment is its chaotic nature. This chaos is rooted in unprecedented rates of change and high levels of complexity. In turn, rapid change and effective decision-making create an environment of high risk in which decision-makers possess little certainty about what the future holds.

In the organization, two types of decisions can be singled out: programmed (complex) and non-programmed (routine) (Bazerman 1995). For a manager or entrepreneur, the higher up the managerial tree a person progresses, the more the job moves away from solving problems defined by others towards the crystallization of new problems which establish parameters within which others must act. With their emphasis on problem-solving, academic tests of competence are usually a poor guide to the various skills and procedures required to fulfill this function of problem innovation. Non=programmed decisions require more attention and excellent decision-making skills because there are outcomes that are difficult to predict and foreshadow (Stephen 2005).

To ensure effective decision-making, a manager should take into account the following steps; information gathering; problem innovation; option selection; implementation; evaluation; feedback, learning, and refinement. Option selection is what classical decision theory is all about, and merits little further comment except perhaps to say that though quantitively phrased, many of decision theory’s ideas have practical value as qualitative guidelines (Simon 2002).

More important is the question of implementation which came to the fore as an issue when people noticed that plans and consultants’ reports had a habit of gathering dust rather than providing support for change. Many of the problems associated with implementation can be solved just by taking into account the decision-making of a wider class of decision-makers than might otherwise be the case (as an excellent introduction to information systems implementation.

Decision-making gives managers the means to disengage themselves from a particular situation, from its narrative, from one’s roles and a dominating conceptual scheme. Effective application and understanding of decision-making enable one to assess one’s situation, evaluate present and new possibilities, and create decisions that are not parochially embedded in a restricted context or confined by a certain point of view. Naturalistic decision-making takes into account ethical theory but not abstractly (Flin et al 1996).

For managers and entrepreneurs, the linear decision-making process is one of the effective decision-making tools which help to ensure confidence and effectiveness of the decision. In a sense, there is nothing mystical about implementation: it just requires a more comprehensive account of stakeholders and their interests, though without a separate and explicit implementation stage decisions may collapse rather quickly.

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The final items, evaluation, feedback, learning, and refinement are part of one process though the emphasis varies between organizations. Some public sector bodies are primarily keen on evaluation, though for reasons which have more to do with accountability than with learning. failure to reappraise initially rejected alternatives, poor information search, selective bias in processing information available, and failure to work out contingency plans. Decisions in which losses might be substantial are especially susceptible as groups are only weakly conditioned to follow good decision-making rules by the organization in which they operate (Salas and Klein 2001).

In a complex environment, it is really difficult for managers to have confidence in decision-making. This is because in the first instance ethics has to do with human relationships and human activities, not with abstract formal principles. It generates conclusions from that particular set of events, taking into account not merely the situation but its narrative and the set of mental models or conceptual schemes that frames these events (Cohen et al 1972).

Decision-making and cognitive processes are essential to get one from a particular situation to a more disengaged perspective (Bazerman 1995). It is then sometimes argued that social, political, and legal institutions, along with the corporate culture and the particular roles and role responsibilities of the managers and companies in question, create a causal nexus that constrains what might consider morally appropriate behavior and often precludes the consequential avoidance of harm. In contrast to traditional decision-making, All decisions are affected by bounded rationality which means that managers have limited resources and time for decision making, so an ideal solution is impossible in any circumstances. Managers have imperfect and incomplete information, so they cannot objectively evaluate facts and data crucial for the decision-making (Fitzgerald, 2002).

Confidence can be achieved by assessing the decision quality. To determine effects on decision quality it is helpful to decompose the decision into the basic elements noted at the start of this article. Options become more or less attractive as discussions progress and this depends on their acceptance by the group. The degree of individual commitment however depends on an individual’s evaluation and the final decisions usually emerge early on with subsequent discussion providing a reinforcement role (Fitzgerald, 2002). Discussions themselves may be categorized along three dimensions.

First, they may be directed towards the decision task at hand or they may be focused on actions designed to foster and maintain group cohesion and identity. Secondly, some issues are handled more implicitly than others–for example, activities relating to the group dynamics are difficult for group members to surface and deal with explicitly.

A more subjective approach to process evaluation which has been used extensively relies on subjective responses to attitudinal questions. Comfort with support tools depends to some extent on familiarity with information technology, but it is worth remembering that this is only a sufficient condition for the continued use of support tools. Attitudinal measures are no substitute for proxies or surrogates or the performance benefits discussed above. Often innovation is tried because of the enthusiasm of an individual (Harrison 1999).

The process of decision-making takes into account context and tradition, impartiality, and minimum moral standards, is just that: a process, a dynamic process, in which one challenges the presuppositions of tradition, tests one’s impartiality against context and continues to shape one’s decisions and refine one’s moral minimums (Lee et al 1999). Moral judgments are a result of a delicate balance of context, evaluation, the projection of moral minimums, and the presence or absence of imagination (Lee et al 1999). Such a process is seldom complete, pure objectivity is impossible, but infallibility of judgment is not part of the goal.

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Indeed, moral judgments are at best partial solutions (Fitzgerald, 2002). Still, they should be solutions that serve as the starting place or models for new series of decisions, even though these, too, are always at risk of being morally challenged. The linchpin of this process is a highly developed approach that perceives the nuances of a situation, challenges the framework or scheme in which the event is embedded, and imagines how that situation and other similar situations might be different (Salas and Klein 2001).

The ideal is not absolute agreement but rather temporary equilibrium, a dynamic consensus that provides the ground and impetus for moral progress. The rapidity of change in today’s world contributes measurably to complexity. One way it does this is by creating moving targets. This is seen clearly in our attempts to define needs and requirements. Even as we think we finally understand the customers’ needs, they are changing. Sources of change include changing technology, the changing position of competitors, changing economic forces (for example, the growth of inflation), changing players, and changing budgets (Bazerman 1995).

Decision-making helps organizations to respond effectively to changing environments and deal with complexity. The change also contributes to two facets of complexity (Lee et al 1999). First, it leads to increases in the volume of information that must be dealt with. Knowledge grows over time, and today it is growing exponentially. Second, change increases the options companies face. Somehow a change must be controlled. The task force can strengthen the needs analysis in at least three ways (Salas and Klein 1999). First, since it is made up of representatives of different constituencies, it allows for the cross-fertilization of ideas.

The resulting suggestions regarding customer needs will therefore be more robust than if needs were identified by only one or two people. Second, the task force allows the different customer groups to develop a consensus about their needs through give-and-take interaction (Salas and Klein 1999). This shifts some of the burdens of decision-making from the needs analysts to the customers themselves. Furthermore, whatever priorities emerge through this process are likely to be less arbitrary than if determined by a single individual.

Having skilled committed people depends on ensuring that their jobs are organized in a way that complements rather than replaces human skill and experience. Many of the less successful applications of computer technology have been those where work has been organized in a way that has led to boredom, inattention, and loss of interest among the staff concerned. Such attitudes cannot produce high performance (Perrin et al 2001).

Conversely, where decisions on work organization have ensured that the skills and experience of staff have been complemented by the technology, the effects have been highly beneficial. In such cases, staff has shown themselves able and willing to accept responsibility, to work to overcome temporary difficulties in the system, to suggest valuable additional uses, and so on. By organizing work in a way that satisfies the well-established motivational requirements of individual jobs, and grouping them into natural work teams, companies have been able to achieve far more benefits from technical innovation than where such factors have been ignored (Russo and Shoemaker 1990).

Researchers suggest that the organization should develop tight methods and procedures for cost and schedule estimates. The procedures can be form-driven so that estimators need merely fill out a form to get the estimates they need (Salas and Klein 1999). As part of this process, estimators should be supplied with checklists of items that should be included in the estimates. Explicit methods and procedures for estimating will increase the consistency of estimates in the organization and will counter the amateur’s propensity to contribute to the “missing components” problem.

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Organizations that employ a sales force to sell their products and services encounter a common problem: during pre-award negotiations, the salespeople promise clients features and services that the project and production staff cannot provide. In trying to understand why problems exist, project staff should determine whether the problems are occurring in a politically charged environment (Cohen et al 1972). This is important to know. Political environments are notoriously messy. In such environments, rational solutions are less important than “politically correct” ones (Fitzgerald, 2002).

In sum, it is difficult for managers and entrepreneurs to be confident in their decision-making thus such models as groupthink and critics paths theory help to accept organizational decisions and develop growth strategies. Decision-making is an important part of modern management and organizational behavior science because allows companies to understand reasons and moral factors which influence a decision-making process. The existence of roles permits predictability of human behavior and stability in social relationships. Ordinarily, there are good reasons for acting according to role demands and ideals. Finally, given a particular set of recurring events, one begins to examine and sometimes revise the moral rules or precepts of common morality themselves and respond effectively to changing social and economic conditions and complexity.

References

Bazerman M.H. (1995). Judgment in Managerial Decision Making (3rd Edition), Wiley.

Cohen M. D, March J. G. and Olsen J. P. (1972). A Garbage can model of organizational choice. Administrative Science Quarterly 17: 1-25.

Fitzgerald, S. G. (2002). Decision making, oxford: capstone publishing. Pp.7-19.

Flin, R., Stewart, K. Slaven, G. (1996). Emergency Decision Making the Offshore Oil and Gas Industry. Human Factors, 38, p. 262.

Harrison E.F. (1999), The Managerial Decision Making Process, 5th Edition , Houghton Mifflin, Boston.

Lee D., Newman P., and Price R. (1999). Decision Making in Organizations, Financial Times/Pitman Publishing.

Perrin, B. M., Barnett, B. J., Walrath, L., Grossman. J. D. (2001), Information Order and Outcome Framing: An Assessment of Judgment Bias in a Naturalistic Decision-Making Context. Human Factors, 43, p. 227.

Russo, J. E. and Shoemaker. P. J. H. (1990). Decision traps: the ten barriers to brilliant decision making and how to overcome them, New York: Fireside. pp. 173-210.

Salas, E., Klein, G. A. (2001). Linking Expertise and Naturalistic Decision Making. Lawrence Erlbaum; 1 edition.

Simon, M., Houghton, S. M. and Aquino, K. (2002). Cognitive biases, risk perception and venture formation: how individuals decide to start companies, journal of business venturing, 15,113-134.

Stephen.R., Rolf.B.,Ian.S.,and Mary.C. (2005) Management(4th ed ).

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