DECISION MAKING CONDITIONS
The conditions for making decisions are made under certainty, uncertainty and risk are based on our feelings and our experiences.
1. Certainty
We experience certainty about a specific question when we have a feeling of complete belief or complete confidence in a single answer to the question.
Decisions such as deciding on a new carpet for the office or installing a new piece of equipment or promoting an employee to a supervisory position are made with a high level of certainty.
While there is always some degree of uncertainty about the eventual outcome of such decisions there is enough clarity about the problem, the situation and the alternatives to consider the conditions to be certain.
2. Uncertainty
A decision under uncertainty is when there are many unknowns and no possibility of knowing what could occur in the future to alter the outcome of a decision. We feel uncertainty about a situation when we can't predict with complete confidence what the outcomes of our actions will be. We experience uncertainty about a specific question when we can't give a single answer with complete confidence.
Launching a new product, a major change in marketing strategy or opening your first branch could be influenced by such factors as the reaction of competitors, new competitors, technological changes, and changes in customer demand, economic shifts, government legislation and a host of conditions beyond your control.
These are the type of decisions facing the senior executives of large corporations who must commit huge resources.
3. Risk:
A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives. A far more common situation than decision making under certainty is one of risk, under risk, managers have historical data from past personal experiences or secondary information that lets them assign probabilities to different alternatives.
Monday, January 3, 2011
Levels of Decision Making
LEVELS OF DECISION MAKING:
Decision-making increasingly happens at all levels of a business. The Board of Directors may make the grand strategic decisions about investment and direction of future growth, and managers may make the more tactical decisions about how their own department may contribute most effectively to the overall business objectives. But quite ordinary employees are increasingly expected to make decisions about the conduct of their own tasks, responses to customers and improvements to business practice. This needs careful recruitment and selection, good training, and enlightened management.
Figure 1: Levels of Decision-Making
Strategic Decisions. These affect the long-term direction of the business e.g. whether to take over Company A or Company B
Tactical Decisions. These are medium-term decisions about how to implement strategy e.g. what kind of marketing to have, or how many extra staff to recruit
Operational Decisions. These are short-term decisions (also called administrative decisions) about how to implement the tactics e.g. which firm to use to make deliveries.
Decision-making increasingly happens at all levels of a business. The Board of Directors may make the grand strategic decisions about investment and direction of future growth, and managers may make the more tactical decisions about how their own department may contribute most effectively to the overall business objectives. But quite ordinary employees are increasingly expected to make decisions about the conduct of their own tasks, responses to customers and improvements to business practice. This needs careful recruitment and selection, good training, and enlightened management.
Figure 1: Levels of Decision-Making
Strategic Decisions. These affect the long-term direction of the business e.g. whether to take over Company A or Company B
Tactical Decisions. These are medium-term decisions about how to implement strategy e.g. what kind of marketing to have, or how many extra staff to recruit
Operational Decisions. These are short-term decisions (also called administrative decisions) about how to implement the tactics e.g. which firm to use to make deliveries.
Types of Decision
TYPES OF DECISIONS:
Managers would be overwhelmed with decision making if each situation had to be treated as novel, that is, new. Fortunately this is not so. Managerial decisions can be programmed or non - programmed.
Programmed decisions: Programmed decisions are made in routine, repetitive, well-structured situations with predetermined decision rules. These may be based on habit, or established policies, rules and procedures and stem from prior experience or technical knowledge about what works or does not work in a given situation.
for example, the fighting and civil services and, in industry, production areas. These decisions can be taken by relatively junior staff, and some can be executed by computers or even by servo-mechanisms – the speed-control mechanism on a clockwork motor, for instance. Many programmed decisions are derived from established practices and procedures or habit. Computers are an ideal tool for dealing with several kinds of complex programmed decisions.
Most of the decisions made by first-line managers and many by middle managers.
For example, organizations often have standardized routines for handling customer complaints or employee discipline. Decisions are programmed to the extent that they are repetitive and routine and that a definite approach has been worked out for handling them. Because the problem is well-structured, the manager does not have to go to the trouble and expense of working through an involved decision making process.
Non-programmed decisions: Non-programmed decisions are unique decisions that require a 'custom made' solution. This is when a manager is confronted with an ill-structured or novel problem and there is no 'cut and dried solution'. The creation of a marketing strategy for a new service represents an example of a non-programmed decision. IBM Australia's introduction of a personal computer in the 1980s was unlike any other decision the company had previously made. Non programmed decisions are typically one shot decisions that are usually less structured than programmed decision. These decisions deal with new areas and new problems, and are the main pre-occupation of senior managers – or at least they should be!
Managers would be overwhelmed with decision making if each situation had to be treated as novel, that is, new. Fortunately this is not so. Managerial decisions can be programmed or non - programmed.
Programmed decisions: Programmed decisions are made in routine, repetitive, well-structured situations with predetermined decision rules. These may be based on habit, or established policies, rules and procedures and stem from prior experience or technical knowledge about what works or does not work in a given situation.
for example, the fighting and civil services and, in industry, production areas. These decisions can be taken by relatively junior staff, and some can be executed by computers or even by servo-mechanisms – the speed-control mechanism on a clockwork motor, for instance. Many programmed decisions are derived from established practices and procedures or habit. Computers are an ideal tool for dealing with several kinds of complex programmed decisions.
Most of the decisions made by first-line managers and many by middle managers.
For example, organizations often have standardized routines for handling customer complaints or employee discipline. Decisions are programmed to the extent that they are repetitive and routine and that a definite approach has been worked out for handling them. Because the problem is well-structured, the manager does not have to go to the trouble and expense of working through an involved decision making process.
Non-programmed decisions: Non-programmed decisions are unique decisions that require a 'custom made' solution. This is when a manager is confronted with an ill-structured or novel problem and there is no 'cut and dried solution'. The creation of a marketing strategy for a new service represents an example of a non-programmed decision. IBM Australia's introduction of a personal computer in the 1980s was unlike any other decision the company had previously made. Non programmed decisions are typically one shot decisions that are usually less structured than programmed decision. These decisions deal with new areas and new problems, and are the main pre-occupation of senior managers – or at least they should be!
The Decision Making Process
THE DECISION MAKING PROCESS:
Managers make decisions affecting the organization daily and communicate those decisions to other organizational members. Some decisions affect a large number of organization members, cost a great deal of money to Carry out, or have a long term effect on the organization. Such significant decisions can have a major impact, not only on the management systems itself, but on the career of the manager who makes them.
Other decisions are fairly insignificant, affecting only a small member of organization members, costing little to carry out, and producing only a short term effect on the organization.
Figure 1: The Decision-Making Process
The model in Figure 1 above is a normative model, because it illustrates how a good decision ought to be made. Business Studies also uses positive models which simply aim to illustrate how decisions are, in fact, made in businesses without commenting on whether they are good or bad.
1. Identifying a problem: The first step towards a decision making process is to define the problem. Obviously, there would be no need to make a decision without having a problem. So, the first thing one has to do is to state the underlying problem that has to be solved. You also have to clearly state the outcome or goal that you desire after you have made the decision. This is a good way to start, because stating your goals would help you in clarifying your thoughts. If the problem is stated incorrectly or unclearly then your decisions will be wrong.
2. Identify Alternatives: Sometimes your only alternatives are to do it or don't do it. Most of the time you will have several feasible alternatives. It is worth doing research to ensure you have as many good alternatives as possible.
3. Develop Alternatives: The situation of making a decision arises because there are many alternatives available for it. Hence, the next step after defining the main problem would be to state out the alternatives available for that particular situation. Here, you do not have to restrict yourself to think about the very obvious options, rather you can use your creative skills and come out with alternatives that may look a little irrelevant. This is important because sometimes solutions can come out from these out-of-the-box ideas. You would also have to do adequate research to come up with the necessary facts that would aid in solving the problem.
4. Evaluate the Alternatives: This can be said to be the one of the most important stages of the decision making process. This is the stage where you have to analyze each alternative you have come up with. You have to find out the advantages and disadvantages of each option. This can be done as per the research you have done on that particular alternative. At this stage, you can also filter out the options that you think are impossible or do not serve your purpose. Rating each option with a numerical digit would also help in the filtration process. This is where the analysis begins. You must have some logical approach to rank the alternatives. Two such logical approaches are discussed at Example of a Decision Matrix and at Sample SWOT Analysis.
5. Make A Decision - You have evaluated your alternatives. Two or more of your high ranked alternatives may be very close in the evaluations. You should eliminate all of the alternatives that were low ranked. Now it is time to go back and examine the inputs you made to evaluation criteria for the close high ranked alternatives. Do you still feel comfortable with the inputs you made? When you have made any changes it is time for some subjection. You have eliminated the alternatives that do not make logical sense. Now it is time to let your subconscious work. Review all the details of the remaining high ranked close alternatives, so they are completely clear in your mind. Completely leave the project alone for a few days. When you return to the project, the decision will likely be very clear in your head. This only works if you have done your homework!
6. Implement the Solution: The next obvious step after choosing an option would be implementing the solution. Just making the decision would not give the result one wants. Rather, you have to carry out on the decision you have made. This is a very crucial step because all the people involved in the implementation of a solution should know about the implications of making the decision. This is very essential for the decision to give successful results.
7. Monitor your Solution: Just making the decision and implementing it is not the end of the decision making process, it is very important to monitor your decision regularly. At this stage, you have to keep a close eye on the progress of the solution taken and also whether it has led to the results you expected.
These steps to decision making process may, at first, seem very complicated. However, these are essential decision making techniques that would aid you in taking proper decisions in your personal as well as professional life.
Managers make decisions affecting the organization daily and communicate those decisions to other organizational members. Some decisions affect a large number of organization members, cost a great deal of money to Carry out, or have a long term effect on the organization. Such significant decisions can have a major impact, not only on the management systems itself, but on the career of the manager who makes them.
Other decisions are fairly insignificant, affecting only a small member of organization members, costing little to carry out, and producing only a short term effect on the organization.
Figure 1: The Decision-Making Process
The model in Figure 1 above is a normative model, because it illustrates how a good decision ought to be made. Business Studies also uses positive models which simply aim to illustrate how decisions are, in fact, made in businesses without commenting on whether they are good or bad.
1. Identifying a problem: The first step towards a decision making process is to define the problem. Obviously, there would be no need to make a decision without having a problem. So, the first thing one has to do is to state the underlying problem that has to be solved. You also have to clearly state the outcome or goal that you desire after you have made the decision. This is a good way to start, because stating your goals would help you in clarifying your thoughts. If the problem is stated incorrectly or unclearly then your decisions will be wrong.
2. Identify Alternatives: Sometimes your only alternatives are to do it or don't do it. Most of the time you will have several feasible alternatives. It is worth doing research to ensure you have as many good alternatives as possible.
3. Develop Alternatives: The situation of making a decision arises because there are many alternatives available for it. Hence, the next step after defining the main problem would be to state out the alternatives available for that particular situation. Here, you do not have to restrict yourself to think about the very obvious options, rather you can use your creative skills and come out with alternatives that may look a little irrelevant. This is important because sometimes solutions can come out from these out-of-the-box ideas. You would also have to do adequate research to come up with the necessary facts that would aid in solving the problem.
4. Evaluate the Alternatives: This can be said to be the one of the most important stages of the decision making process. This is the stage where you have to analyze each alternative you have come up with. You have to find out the advantages and disadvantages of each option. This can be done as per the research you have done on that particular alternative. At this stage, you can also filter out the options that you think are impossible or do not serve your purpose. Rating each option with a numerical digit would also help in the filtration process. This is where the analysis begins. You must have some logical approach to rank the alternatives. Two such logical approaches are discussed at Example of a Decision Matrix and at Sample SWOT Analysis.
5. Make A Decision - You have evaluated your alternatives. Two or more of your high ranked alternatives may be very close in the evaluations. You should eliminate all of the alternatives that were low ranked. Now it is time to go back and examine the inputs you made to evaluation criteria for the close high ranked alternatives. Do you still feel comfortable with the inputs you made? When you have made any changes it is time for some subjection. You have eliminated the alternatives that do not make logical sense. Now it is time to let your subconscious work. Review all the details of the remaining high ranked close alternatives, so they are completely clear in your mind. Completely leave the project alone for a few days. When you return to the project, the decision will likely be very clear in your head. This only works if you have done your homework!
6. Implement the Solution: The next obvious step after choosing an option would be implementing the solution. Just making the decision would not give the result one wants. Rather, you have to carry out on the decision you have made. This is a very crucial step because all the people involved in the implementation of a solution should know about the implications of making the decision. This is very essential for the decision to give successful results.
7. Monitor your Solution: Just making the decision and implementing it is not the end of the decision making process, it is very important to monitor your decision regularly. At this stage, you have to keep a close eye on the progress of the solution taken and also whether it has led to the results you expected.
These steps to decision making process may, at first, seem very complicated. However, these are essential decision making techniques that would aid you in taking proper decisions in your personal as well as professional life.
Decision Making
DECISION MAKING:
Decision Making is the process of choosing the best alternative for reaching objectives.
Managers can be trained to make better decisions. They also need a supportive environment where they won’t be unfairly criticized for making wrong decisions (as we all do sometimes) and will receive proper support from their colleague and superiors. A climate of criticism and fear stifles risk-taking and creativity; managers will respond by ‘playing it safe’ to minimize the risk of criticism which diminishes the business’ effectiveness in responding to market changes. It may also mean managers spend too much time trying to pass the blame around rather than getting on with running the business
Decision Making is the process of choosing the best alternative for reaching objectives.
Managers can be trained to make better decisions. They also need a supportive environment where they won’t be unfairly criticized for making wrong decisions (as we all do sometimes) and will receive proper support from their colleague and superiors. A climate of criticism and fear stifles risk-taking and creativity; managers will respond by ‘playing it safe’ to minimize the risk of criticism which diminishes the business’ effectiveness in responding to market changes. It may also mean managers spend too much time trying to pass the blame around rather than getting on with running the business
Management Skills
MANAGERIAL SKILLS:
Managerial skill is to be understood as the ability to perform managerial tasks effectively with readiness and dexterity. Skills require knowledge and ability to apply that knowledge competently and efficiently has to be acquired by practice. A skilled person is one who has done the job effectively number of times and in the process of doing so, improved his efficiency at the job.
Various authors identified certain tasks of management discipline. Some authors have identified a list of managerial skills many of them being the tasks of management..
Research by Robert L. Katz ,found that managers needed three essential skills. These are technical skills, human skills and conceptual skills.
Technical skills
For a manager managing any activity, the actual work involved in the activity is technical skill. It includes knowledge of and proficiency in a certain specialized field, such as engineering, computers, financial and managerial accounting, or manufacturing. These skills are more important at lower levels of management since these managers are dealing directly with employees doing the organization's work. .
Contributing to corporate mission/departmental objectives, customer focus, multitasking; working at multiple tasks at parallel, negotiating skills, project management, reviewing operations and implementing improvements, setting and maintaining performance standards internally and externally, setting priorities for attention and activity, time management.
Human skills
Ability to transform ideas into words and actions, credibility among colleagues, peers, and subordinates, listening and asking questions, presentation skills and spoken format, presentation skills; written and graphic formats
To communicate with other persons in the department or organizations and the ability to understand their desires and persuade them to ones point of view are human skills.
It involves the ability to work well with other people both individually and in a group. Because managers deal directly with people, this skill is crucial! Managers with good human skills are able to get the best out of their people. They know how to communicate, motivate, lead, and inspire enthusiasm and trust. These skills are equally important at all levels of management.
Conceptual skills
Ability to use information to solve business problems, identification of opportunities for innovation, recognizing problem areas and implementing solutions, selecting critical information from masses of data, understanding the business uses of technology, understanding the organization's business model.
Conceptual skills are understanding of how customers of the department or organization react as a group to various activities. Similarly a manager has to understand how suppliers to his department react as a group. Here economic consequences, political consequences, and social consequences come into play and a manager must be able to visualize all these likely outcomes in coming out with his objectives, strategies and tactics.
Managers must have to think and conceptualize about abstract and complex situations. Using these skills managers must be able to see the organization as a whole, understand the relationship among various subunits, and visualize how the organization fits into its broader environment. These skills are most important at top level management.
In words of KatzAbility, the administrator needs:
a) sufficient technical skill to accomplish the mechanics of the particular job for which he is responsible.
b) sufficient human skill in working with others to be an effective group member and to be able to build cooperative effort within the team he leads.
c) sufficient conceptual skill to recognize the interrelationships of the various factors involved in his situation, which will lead him to take that action which achieves the maximum good for the total organization.
In today's demanding and dynamic workplace, employees who are invaluable to an organization must be willing to constantly upgrade their skills and take on extra work outside their own specific job areas. There is no doubt that skills will continue to be an important way of describing what a manager does.
Managerial skill is to be understood as the ability to perform managerial tasks effectively with readiness and dexterity. Skills require knowledge and ability to apply that knowledge competently and efficiently has to be acquired by practice. A skilled person is one who has done the job effectively number of times and in the process of doing so, improved his efficiency at the job.
Various authors identified certain tasks of management discipline. Some authors have identified a list of managerial skills many of them being the tasks of management..
Research by Robert L. Katz ,found that managers needed three essential skills. These are technical skills, human skills and conceptual skills.
Technical skills
For a manager managing any activity, the actual work involved in the activity is technical skill. It includes knowledge of and proficiency in a certain specialized field, such as engineering, computers, financial and managerial accounting, or manufacturing. These skills are more important at lower levels of management since these managers are dealing directly with employees doing the organization's work. .
Contributing to corporate mission/departmental objectives, customer focus, multitasking; working at multiple tasks at parallel, negotiating skills, project management, reviewing operations and implementing improvements, setting and maintaining performance standards internally and externally, setting priorities for attention and activity, time management.
Human skills
Ability to transform ideas into words and actions, credibility among colleagues, peers, and subordinates, listening and asking questions, presentation skills and spoken format, presentation skills; written and graphic formats
To communicate with other persons in the department or organizations and the ability to understand their desires and persuade them to ones point of view are human skills.
It involves the ability to work well with other people both individually and in a group. Because managers deal directly with people, this skill is crucial! Managers with good human skills are able to get the best out of their people. They know how to communicate, motivate, lead, and inspire enthusiasm and trust. These skills are equally important at all levels of management.
Conceptual skills
Ability to use information to solve business problems, identification of opportunities for innovation, recognizing problem areas and implementing solutions, selecting critical information from masses of data, understanding the business uses of technology, understanding the organization's business model.
Conceptual skills are understanding of how customers of the department or organization react as a group to various activities. Similarly a manager has to understand how suppliers to his department react as a group. Here economic consequences, political consequences, and social consequences come into play and a manager must be able to visualize all these likely outcomes in coming out with his objectives, strategies and tactics.
Managers must have to think and conceptualize about abstract and complex situations. Using these skills managers must be able to see the organization as a whole, understand the relationship among various subunits, and visualize how the organization fits into its broader environment. These skills are most important at top level management.
In words of KatzAbility, the administrator needs:
a) sufficient technical skill to accomplish the mechanics of the particular job for which he is responsible.
b) sufficient human skill in working with others to be an effective group member and to be able to build cooperative effort within the team he leads.
c) sufficient conceptual skill to recognize the interrelationships of the various factors involved in his situation, which will lead him to take that action which achieves the maximum good for the total organization.
In today's demanding and dynamic workplace, employees who are invaluable to an organization must be willing to constantly upgrade their skills and take on extra work outside their own specific job areas. There is no doubt that skills will continue to be an important way of describing what a manager does.
Changes that Affect Managers
CHANGES THAT AFFECT MANAGERS
Change Management aims to ensure that standardized methods and procedures are used for efficient handling of all changes.Two main groups of changes affect managers’ jobs and are significant to an organization: external forces and internal forces. With external forces, the need for change comes from various sources outside the organization: marketplace, governmental laws and regulations, technology, labor markets, and economic changes.
Internal forces originate from the internal operations of the organization or from the impact of external changes. They include redefining an organization’s strategy, workforce, new equipment, and employee attitudes. Both types of changes are critical to the success of a manager and his/her organization.
One external change managers will face is the marketplace. An organization must be proactive, reactive, and adaptive in order to successfully compete in their niche market. Becoming too comfortable in the status quo without taking the competition or consumer needs and desires into account is a recipe for failure. Search engine companies like Yahoo and Google are examples of organizations that continue to create new technology and applications to respond to evolving demands of consumers.
Governmental laws and regulations are another external force of change. For example, the Sarbanes-Oxley Act required U.S. companies to change the way they disclose financial information and enact corporate governance. Not complying with new and existing federal and state laws can be costly, result in a negative perception, and severe legal ramifications that could ultimately destroy an organization. A recent example of the first two consequences is Wal-Mart. The company has paid between $750 million and $1.5 billion in legal fines and judgments over the past decade alone, including numerous violations of the Fair Labor Standards Act of 1938 (Business Ethics 7th Ed., Ferrell Fraedrich). Managers can help ensure their organization is following the rules by instituting a strict code of ethics.
Change Management aims to ensure that standardized methods and procedures are used for efficient handling of all changes.Two main groups of changes affect managers’ jobs and are significant to an organization: external forces and internal forces. With external forces, the need for change comes from various sources outside the organization: marketplace, governmental laws and regulations, technology, labor markets, and economic changes.
Internal forces originate from the internal operations of the organization or from the impact of external changes. They include redefining an organization’s strategy, workforce, new equipment, and employee attitudes. Both types of changes are critical to the success of a manager and his/her organization.
One external change managers will face is the marketplace. An organization must be proactive, reactive, and adaptive in order to successfully compete in their niche market. Becoming too comfortable in the status quo without taking the competition or consumer needs and desires into account is a recipe for failure. Search engine companies like Yahoo and Google are examples of organizations that continue to create new technology and applications to respond to evolving demands of consumers.
Governmental laws and regulations are another external force of change. For example, the Sarbanes-Oxley Act required U.S. companies to change the way they disclose financial information and enact corporate governance. Not complying with new and existing federal and state laws can be costly, result in a negative perception, and severe legal ramifications that could ultimately destroy an organization. A recent example of the first two consequences is Wal-Mart. The company has paid between $750 million and $1.5 billion in legal fines and judgments over the past decade alone, including numerous violations of the Fair Labor Standards Act of 1938 (Business Ethics 7th Ed., Ferrell Fraedrich). Managers can help ensure their organization is following the rules by instituting a strict code of ethics.
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