Recent orders
Decision making in organizations
Decision making in organizations
Introduction
Decision-making includes an assortment of processes that are all amid thought and action. These processes are an antecedent to behavior; expressing ideas into tangible consequences. Decision-making as a concept is not well defined. This is as result of the aspects and the avenues through with different people view decision-making from. The scope of decisions that people make range from matters that would potentially affect them into their lifetime to mattes as trivial as what to wear for the day. These indicating why decision making as process is not well defined.
According to Bazerman, (1999), decision making in organizations. He points out that when individuals are faced with tough choices, their focus shifts to making the right choice and not making the choice in the right way (Bazerman, 1999). Further indicating that people tend to focus on securing:
More expertise
More inclusion
More resources
Better data regarding the issue
More time to come up with a conclusive decision
With a better decision-making process, individuals would have the best platform for stronger implementation for decisions made.
Decision Issues
Distortions
This comes about due to the irrational nature of man. The decision made are often affected by social pressure, we often care of other people’s opinions, we have preconceived ideas regarding what is acceptable or not therefore making us prone to all kind of illogical thought. Decisions are often informed by emotional and cognitive backgrounds increasing the odds for a distortion free decision –making process.
Distortions in Decision Making
The distortions that come about in decision-making are brought about by distortions in perceptions and by distortions in choice.
Distortion in Perception
Confirmation Bias: distortion occurs because of using of information with the preconceived notion of its outcome. This is often influenced by other organization supporting desired outcome
Wishful thinking: Distortions arise due to seeing organizations prospects in an overlay optimistic light
Primary Effect: This is as a result of the use of recent materials only to aid in the decision-making process
Repetition Bias: This is brought about by the use of information that is favored by many of interested parties
Anchoring: basing a decision on an inappropriate reference point
Source Credibility: arises from favoring the use of information from sources that we like
Attribution asymmetry: occurs as a result of attributing our successes to talents and attributing our failures to circumstances.
Distortion in Choice
Incremental Decision-Making and Escalating Commitment: when individuals are faced by the choice of becoming a manager or a parent. They are probably going to make distortions in their decision-making as a result of choice
Groupthink: this occurs when decisions are arrived at as a result of consensus instead of the quality of the decision made
Authority : distortion occurs when the figure of authority are sensitive to allowing contributions that inform decision-making to come from their juniors
Sunk costs: Distortions arise when organizations choose to allocate less or no budgetary funds to aid decision-making processes.
Meta-Decision Making
These are the decisions that people make regarding decision-making. These decisions often go unnoticed as they are entrenched on a word, a glance and sometimes on an unintentional casing. For Meta-Decision Making processes to be exposed, we would have to analyze our more fleeting thoughts and slow down our thought process.
Challenges
Decision making is often made difficult by the situation that individuals find themselves in. these is as a result of situations being characterized by challenges that further complicate the decision-making process.
Making Good Decisions
It is everyone’s intention to make good decisions. It is therefore justified to look at how to make decisions and how to improve the decisions that we make. The answer to better decisions lies in the content. We therefore have to adjust our decision-making style and understand the avenues and forums within which we base the decision.
Reasons for the decline in quality of Managerial Decision-making
Limited time frames due to the nature of contracting business cycles
Distorted data that is sometimes used in decision-making
The rate of change invalidates the data behind a decision before implementation
The Decision-making Process
Organizations are run by decisions that people in authority make. The soundness of the decisions adhered to is mirrored by the success of the organizations. This lays out the effectiveness and the quality of the decision making-process. The quality of the decision-making process often determines how flourishing a manager will be. Decision-Making is an ongoing process of evaluating circumstances and making choices. The process is dependant of reliable information made available at adequate and opportune moments. The decision-making process entails:
Defining the problem
The definition of the challenge is the first step in the decision-making process. The correct definition of the challenge is key; as it has the potential to affect the secondary steps. The most appropriate way to go about definition of the problem is identifying the problem separately from its indicators.
Identifying the Limiting Factors
Managers should ensure that they have adequate resources to preempt the likelihood of not having the facilities necessary for the adequate decision-making practices at his or her disposal. Identifying limiting factors is bore by the need of managers wanting to make the best decisions with regard to the running of the organizations (Bazerman & Moore, 2008).
Developing Potential Alternatives
Time constraints often-precipitate managers to using quick fixes for their problems and not fully exhausting the possible solutions at their disposal. Managers are encouraged to consider several solutions before settling on one. A practice such as brainstorming is recommended, as the group dynamic Propagates thinking (Thaler & Sunstein, 2008).
Analyzing the Alternatives
This process culminates with the benefits of each idea, giving a clear picture of the advantages and disadvantages that would follow the adaption of a certain decision. This can be done through:
Determine the pros and cons of each alternative.
Perform a cost-benefit analysis for each alternative.
Weight each factor important in the decision, ranking each alternative relative to its ability to meet each factor, and then multiply by a probability factor to provide a final value for each alternative.
Selecting the Best Alternative
This is achieved after carefully analyzing all the alternatives and deciding on the best choice. The choice is often informed by the alternatives that offer the most advantages and pose fewer potential regrets. Managers can also look at the feasibility of the alternatives, as well as the cost effectiveness of each of the alternatives (Cialdini, 2008).
Implementation of the Decision
It is the role of managers to make decisions and ensure that positive outcomes follow up their decisions. It is therefore up to the managers to delegate responsibilities efficiently to ensure the successful implementation of their decisions.
Establish a Control and Evaluation System
This system is important to continuously check on the efficiency of the implemented decisions. It provides managers with information whether to adjust decisions made to attain the objectives intended when selecting the solution.
References:
Bazerman, M. H. & Moore, D., (2008). Judgment in Managerial Decision Making. 7th Ed. NJ: John Wiley & Sons, Inc.
Bazerman, M. H., (1999). Smart Money Decisions. N Y: John Wiley.
Cialdini, R., (2008). Influence: Science and Practice. 5th Ed. Prentice Hall.
Thaler, R.H. & Sunstein, C.R., (2008). Nudge: Improving Decisions about Health, Wealth, &Happiness. New Haven, CT: Yale University Press.
Decision Making (Financial Resources)
Decision Making (Financial Resources)
Name
Institution
Abstract
Decision making is a fundamental component in entrepreneuship and affects a variety of elements in business including legal and regulatory issues, political agendas, cultural perceptions, demographic diversity and financial resources. This paper aims at describing how decisions are made and thereby suggest that decision making affects financial resources in business.
In order to achieve the goal, this paper is divided into three segments. The first segment defines key terms used end to end in the paper. In the second part, a description of how decisions are made is provided as well as perfect examples of decision making showing how they affect the financial resources in a business. The last segment restates the thesis as well as the main points as highlighted in the other two sections.
Keywords: entrepreneur, decision making, financial resources
Decision Making (Financial Resources)
According to the oxford dictionary, an entrepreneur is a person who makes money by starting a small business and more particularly, taking financial risks (Michael, 2008).
Decision making refers to a cognitive process of deciding to do something of paramount importance. In businesses, decisions are made concerning a number of issues including financial decisions as well as other decisions directly affecting the activities of the business (Michael, 2008).
In management, financial resources can be defined as, the inputs in the form of money and in most cases in liquid form that helps in the daily running of the business. In short, financial resources cater for the operation expenses in the business (Pandey, 2011).
How Decisions are made
The detrimental importance of financial decisions to a business is imperative to set up an efficient organization. In most cases, the financial decisions are made by the top financial managers in consultation with the professional, junior staff members in the business.
Decision making is possibly one of the most important catalysts in business. Businesses ranging from large to small enterprises have to make various decisions about their main activities with an aim meeting their ultimate goals and objectives.
At times, decision making can be such a difficult task in business since the resources are always finite while the needs are unlimited. On the other hand, businesses may make decisions but fail to implement such decisions due to the various constraints of the resources.
According to Harrison 2008, there are several steps, which are essential for an effective decision making process. The most important step is to set the business objectives which must be specific, measurable, reliable, and should be achieved in certain duration of time. Secondly, the financial manager searches for alternatives which may be used to meet the business’ ultimate objective. Thirdly, the financial manager compares the alternatives and chooses the most cost effective that would avail the goals of the firm. Fourthly, the financial manager applies the alternative chosen in the organization. After the decision has been implemented in the firm, it is crucial the manager follows up activities and spot checks the weak areas that require improvements.
Most businesses have been successful by following Harrison’s steps in making various financial decisions in their organizations. One of such businesses is an American Company, Walt Disney, which clearly followed the Harrisons model in the purchase of its own television networks, which the top managers thought would continue to increase profitability of the company. The company set out clear objectives as being a market leader in entertainment thereby distributing its products in America. Over the years, it has been able to achieve its objectives and thereby expanding at an alarming rate in the entertainment industry.
Conclusions
Decision making is one of the most important activities in any business since; it assists the business to plan for its resources in an optimal way thereby achieving its objectives in a given period of time. The decision making process involves a sequence of steps as highlighted earlier on in the paper and has actually been fundamental in several businesses including the one pointed out in the paper (Harrison, 2000).
References
Harrison. (2000). Essence of Decision Making. Retrieved May 10, 2012. from ctuonline.edu: http://ctuonline.edu.
Michael, A. (2008). Oxford Advanced Learners’ Dictionary. New York: Oxford University Press.
Pandey, I. (2011). Financial Management. Mumbai: Vikas Publishing House.
Decision Dilemmas
Decision Dilemmas
QUESTION ONE
Case one – Reject the Offer
The fact that the employee was on demand was owed to the current company she was working for. This is clearly indicated in the argument that her training was sponsored by the organization. A contract should be entered defining the minimum period of time she can work for the organization before making a final decision to leave. It would be necessary for the organization to establish the improvement in performance of the employee as a result of the training they offered. Similarly, there is need to provide information on the sole intention for the training. One would reconsider reversing the decision in a situation where the efforts of the employee are not appropriately remunerated by the first organization and where they are not appreciated. Under different circumstances, depending on the relevant factors as mentioned above, the decision might have been different, for instance, where the company only provided experience but not the training.
Case two – Continue to advertise
The decision is based on the fact that each organization is believed to know its product best. Similarly, they have the right to design their advertisements as they deem fit provided the information is not misleading to the consumers. It would be appropriate if the question clearly indicated whether the results found by the organization, which claimed they had the juiciest products, were credible or biased considering they were self carried out. One might change their mind regarding the decision made if a situation contradicting the findings of the firm arises. This is where they will be presumed/proven to be less juicy than others. The decision is likely to be revered where the circumstances vary from the one presented. For instance, where there is sufficient evidence that the results are misleading to the clients and are not accurate. This could also be if the laws of the country do not allow for the advertisers to practise freedom in formulating their own advertisements.
Case three – Not proper, Should not sell
The relationship between the two parties was already manipulated and ceased being professional when the potential buyer company decided to send gifts since it personalized their transaction. To enhance certainty of the decision, information regarding the previous relationship between Bob and the potential buyer should have been indicated. A situation such as an evident professional relationship of the buyer in other business transactions and empirical evidence of an existing relationship between Bob and the potential buyer may lead to a consideration to reverse the decision. The above mentioned circumstances may lead to an automatic change in decision to not sell to the party since it changes the circumstances surrounding the dilemma.
Case four – Suspend them for several games
The decision is based on the coach’s critical demand for discipline and non acceptance of favours and benefits from outsiders. However, having been trained by him, it would be worth giving them a second chance where if breached, they could be kicked out of the team. There should be specification as to whether this has been happening continuously or over a short period. The conduct of the team members when stated should also be able to clarify whether they deserve a second chance or not. The change of circumstances such as a discovery that the team members had been previously warned of the same conduct would automatically reverse the decision. They would be better off out of the team since that would be a clear indication of lack of discipline.
Case five – Close the plant
The decision is based on the consideration that if the adjustments are ignored, the whole organization may end up collapsing. It would be more convincing however if the performance of the plant being closed was clarified. Certain circumstances such as the increase in prices of the opposing firm or reduction in cost of production would lead to reconsidering of the decision. a different answer would be obtained in a case where the plant targeted for closure makes more profits than most of the others, or where there is a guarantee that non closure of the firm will not affect the stability of the organization in the market.
QUESTION TWO
The article, ‘Refugee Operations and Environmental Management’ is based on the important principles of decision making. The author in this case is focussed on the dilemmas that may arise in different situations that require timely decisions to be made. (UNHCR. 2001) argues that the principles are important since they enable a similarity indecisions made regarding similar situations. It is also possible that with the arising of relatively complicated situations, the responsible parties will be able to derive a possible solution regardless of the dilemma involved. For instance, the link between the problem at hand and the parties they involve should be clearly elaborated and defined before the ultimate decision regarding the matter is made. This will ensure that it will be fair, not biased in any way and the conduct of the individuals in sufficiently put into consideration. The author is also specific in stating that the relevant bodies for making decisions should have a rough idea of the possible circumstance that may arise such that in case they do, it will not get them unawares.
The author also brings about some interesting ideas surrounding the factors surrounding decisions to be made. These are very useful in a learning environment as well as for practise in the actual management field. This is so because the management is always responsible for making decisions that affect their subjects. These include the fact that every situation should have a monetary value attached to it. We realize that human beings place so much value on finances such that they rarely risk with it. Converting losses/profits that may come about with a bad/good decision encourages management to critically review a decision before implementing it.
References:
Suhr, J. (2003). Basic Principles of Sound Decision Making. The Institute for Decision Innovations, Inc. Retrieved http://www.value-eng.org/knowledge_bank/attachments/Suhr%20Jim%20Basic%20Principles%20of%20Sound%20Decisionmaking.pdf
Stormer, W. (1991). The Decision Dilemma – Cognitive Bias. Psychology. Retrieved from http://handle.dtic.mil/100.2/ADA235660
UNHCR. (2001). Key Principles for Decision Making. Refugee Operations and Environmental Management. Retrieved from http://postconflict.unep.ch/humanitarianaction/documents/02_10-01.pdf