Managerial Decision-Making and Its Nature

Introduction

One of the main jobs of any manager irrespective of the level that he or she is managing is to make a decision. Deciding in this modern wired world of breakneck competition has become a complex affair that requires the manager to have a wide range of qualities, knowledge, and attributes to deliver a successful decision. On the strength or weakness of a particular decision, the fate of a company or the success of an enterprise may rest. Decision-making is governed by many factors such as the environment, the existing work culture, and the cultural context, degree of competition, integration with the wider world, and management of change. Each of these factors works upon the mind of the decision-maker before the person can arrive at a sound decision. This essay aims to examine the evolving nature of managerial decision-making processes which today transcend the traditional management practices of yesteryear.

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Main body

Today’s globalized environment has increased the complexity of taking the right decision. A right decision, in business terms usually means a decision that will benefit the organization in tangible terms where monetary benefits are the bottom line. A diversified workplace means that a manager can no longer apply the same decision yardsticks for a typical North American work ethos and culture as the company may have a substantial cross-cultural workforce. Such diversity requires the manager, an ability to understand the differing ethos, cultures, and traits of the workforce. For example, a manager who has a substantial Muslim workforce must expect that the subordinates will take time off to pray five times a day out of which, prayers at noon and afternoon may fall within the work period. So taking any decisions about human resource management, or dealing with a similar workforce in different countries may require an adjustment to traditional practices. Direct application of old paradigms would most probably lead to the workforce quitting or not delivering the required results. Thus decision making today requires substantial cultural inputs.

The modern environment has a greater degree of uncertainty than certainty. The rapid advancements in information technologies and increasing competition from developing countries mean that the level of certainty of achieving organizational goals has reduced. Therefore, a decision-maker has to be adept in taking decisions in an atmosphere of certainty as well as uncertainty. While the realm of certainty is easier to tackle, it is the uncertainty paradigm that offers the greatest challenges to taking a decision. A wrong decision can be very costly, hence the need to remove the ‘noise’ from the decision-making environment and the need to present to the decision-maker the right information and support.

A globalized world means greater interaction with other nations, institutions, and corporations. Each entity has its own set of ethics, which may or may not be in consonant with its standards of ethics. Thus a decision-maker not only has to know the ‘legalese’ of international ethics but also the nuances so that the company’s ethics can be ‘aligned’ to those of the partners to deliver success. It must also be understood that ‘ethics’ have different meanings and different connotations. The decision-making process, therefore, has to consider this factor. While greater and faster access to information has helped remove many ambiguities, coherently handling that information requires a certain amount of rule-based planning for most purposes. Faster access to information has also meant an increased tempo of business operations. Consequently, decision-making now has to be faster, quicker, and be executed with speed and accuracy. To aid decision-making, organizations equip decision-makers with decision-making tools. According to Lee, Oh, and Pines “Quantitative methods such as Operations Research (OR), which comprises of simulation, linear and nonlinear programming, queuing theory and stochastic modeling” (p. 1) are some of the tools used for decision making. Management theorists have also postulated that the decision-making process requires the manager to store a large amount of information in memory. Mackenzie states that “by accumulating information, the manager establishes a savings account of stored information that is available to be drawn upon during the decision process” (p. 1). Knowledge empowers the manager and changes the leader’s perceptions and the “information environment influences the information behaviors of the individual managers who interact within the environment” (Mackenzie, p. 2).

The managerial decision-making process is an involved process with clearly defined steps. According to Drucker, effective executives are those who take responsibility for their decisions. Taking a decision involved letting everybody in the organization know about it, holding someone accountable for the decision, specifying who all will be affected by the decision and their approval or dissent on the decision and even obtaining names of people not directly affected by the decision ( 2004, p. 61). Taking a decision is never easy. To aid decision making, decision support systems and tools are available. Tools such as decision matrix work well when decisions on quantifiable parameters are required to be taken but may not work as well when the problem at hand is not deterministic or involve human resource management or the matter has a sociological basis. Taking a decision requires an ability to do so. Not all people can be decision makers as Drucker succinctly puts that “a great many people perform best as advisers, but cannot take the burden and pressure of the decision” (1999, p. 174). Taking a managerial decision involves not just the manager whose psychological profile, traits and personality have a direct bearing on the decision but also the effects on the subordinates, the work group environment and the company. The nature of a managerial decision cannot be divorced from the work group environment which includes the physical environment; the office premises, intergroup relationships, satisfaction levels, definition of organizational goals, performance incentives and fringe benefits. All these factors impact the decision maker’s ability to deliver a right decision.

Most textbooks on managerial decision making models talk about “rational, bounded rationality and political models” (Hellriegel, Slocum, & Woodman, 2001, p. 424) as the standard ways for taking a managerial level decision. The US Department of Energy (DOE) Guidebook to decision making states that “Good decisions can best be reached when everyone involved uses a clearly defined and acknowledged decision-making process” (Baker, et al., 2001, p. 1). This implies that decision making has a quantifiable mechanistic methodology which can be applied and arrived at through following a standard operating procedure. The guidebook further amplifies that there are eight steps to arriving at a decision namely defining the problem, determining the requirements, establishing goals, identifying alternatives, defining criteria, selecting a decision making tool, evaluating the alternatives against the criteria and lastly validating solutions against the problems. The DOE guidebook justifies adopting such a ‘rule based’ formulation for decision making because of the immense complexities involved in the field of energy wherein the complex set of variables requires a process to simplify the job of the decision maker.

Despite the preponderance of ‘scientific’ methodologies for executing a decision, the nature of decision making has not lost its early held acceptance of intuition. Many a managers rely on ‘gut feelings’ or ‘feeling in the bones’ when they have to take a snap decision where the time consuming lengthy and often mechanistic decision making process cannot be applied. Numerous studies have indicated that intuition is not as much an ‘extra sensory’ myth as it is made out to be. Intuition is, according to some researchers, mainly a ‘syncretistic’ approach by the brain to arrive at a solution or a decision through non- conscious or subconscious process. Neurobiological studies have shown that the human cortex absorbs far greater amount of information than what it consciously remembers. This stored information is then processed in a manner not discernible or recognizable to the conscious processes of the brain and thus appears to be some sort of ‘sixth sense’. In fact “Intuition is viewed as a potential means of helping managers make both fast and accurate decisions in organizations” (Dane & Pratt, 2007, p. 50).

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Therefore it can be surmised that the nature of decision making in the modern environment has become extremely complex which requires the manager to have a broad range of knowledge and understanding of diverse subjects such as cross cultural ethics, nuances, business practices, laws as also be conversant with the latest decision support systems and tools available. A good manager would be expected to use all the support that modern techniques provide as also use intuitive knowledge where applicable.

Works Cited

  1. Baker, D., Bridges, D., Hunter, R., Johnson, G., Krupa, J., Murphy, J., et al. (2001). GuideBook to Decision Making Methods. Retrieved December 15, 2008, from US Department of Energy.
  2. Dane, E., & Pratt, M. G. (2007). Exploring Intuition and Its Role in Managerial Decision Making. Academy of Management Review , Vol. 32, No. 1, 33–54.
  3. Drucker, P. F. (1999). Management Challenges for the 21st Century. Oxford: Butterworth-Heinemann.
  4. Drucker, P. (2004). What Makes an Effective Executive. Harvard Business Review , 58-63.
  5. Hellriegel, D., Slocum, J. W., & Woodman, R. W. (2001). Organizational Behaviour 9th edn. Cincinnati: South-Western College Publishing.
  6. Lee, E., Oh, J.-Y., & Pines, E. (n.d.). Practical Managerial Decision Making Tools: Web.
  7. Mackenzie, M. L. (n.d.). A Theoritical Model Of Managerial Decision Making and The Accumalation Of Information.
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