THE DECISION MAKING

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Introduction Dear readers, every decision matters. Every action you take has a consequence in your future. Making decisions is easy. Making the right decision is hard. When making decisions, you will face many barriers, including the quality of information you have, the amount of time allowed, and several cognitive biases that will influence your decisions. In addition to these barriers, we’ll also look at some common styles of decision making, including satisficing, optimizing, intuitive, rational, combinatorial, and positional. A decision is the conclusion of a process by which one chooses between two or more available alternative courses of action for the purpose of attaining a goal(s). This process is called decision making. Managerial decision making is synonymous with the whole process of management. Decision making by nature involves a series of decisions such as what should be done? When? How? Where? By whom?. Some of the decisions are so routine that you can make them even without giving them much thought. Sometimes what we don't know that difficult or challenging decisions demand more consideration. The followings are the sort of decisions that involve: 

Uncertainty – Many of the facts may be unknown.

Complexity – There can be many, interrelated factors to consider.

High-risk consequences – The impact of the decision may be significant.

Alternatives – There may be various alternatives, each with its own set of uncertainties and consequences.

Interpersonal issues – You need to predict how different people will react.


When you’re making a decision that involves complex issues like these, you also need to engage your problem-solving, as well as decision-making skills. It pays to use an effective, robust process in these circumstances, to improve the quality of your decisions and to achieve consistently good results. The decision-making process begins when a person identifies the real problem. If the problem is inaccurately defined, every step in the decision-making process will be based on an incorrect starting point. The most troubling situations found in an organization or to some people is that they can usually be identified as symptoms of underlying problems. And such symptoms all indicate that something is wrong with an organization or a person, but they don't identify root causes. A successful manager doesn't just attack symptoms; he works to uncover the factors that cause these symptoms. All people need to make the best decisions. So, in order to be good people in making good decisions, we need to have the ideal resources— information, time, personnel, equipment, and supplies — and identify any limiting factors. Realistically, many people operate in an environment that normally doesn't provide ideal resources. So, because of that we mostly choose to satisfice in order to make the best decision possible with the information, resources, and time available. Time pressures frequently cause a person to move forward after considering only the first or most obvious answers. However, successful problem solving requires a thorough examination of the challenge, and a quick answer may not result in a permanent solution. Thus, a person should think through and investigate several alternative solutions to a single problem before making a quick decision.


Obviously, not all decisions prove to be good ones. Sometimes that is due to unfortunate situations that would have been impossible to foresee. Other times, however, the problem with the decision could have been avoided. There are the potential barriers that we should be aware of through the decisionmaking process: i.

Information-Related Barriers

Almost every decision is based at least in part on information that the decision-maker trusts. The reliability and use of that information can potentially lead to multiple problems. One of the most obvious information-related problems occurs when the information is either incorrect or incomplete. Trusting information that is faulty leads to many wrong deductions and conclusions. If information is incomplete, even if the decision-maker is aware of that fact, uncertainty is introduced, and any decision based on that partial information could prove to be misguided. On the other hand, a contrasting problem can arise when there is too much information available. Information overload can make it difficult to grasp the big picture and recognize which pieces of information are most important. Another problem it can create is that large sets of data may contain data that seems contradictory, leading the analyst to confusion or uncertainty and an inability to synthesize it as a whole. An overabundance of information can also lead to an inability to process everything to the decision maker’s satisfaction. The result can be a harmful delay in the decision-making process as the overabundance of information is being considered for an undue amount of time. Similarly, if


the decision-maker is excessively concerned to find every possible piece of information, the same problem can arise. ii.

Circumstance and Time-Related Barriers

A variety of difficulties can also arise from the circumstances in the midst of which a decision-maker must work. One of the most common issues is stress, which can arise from a great number of sources. If the decision-maker is experiencing abnormal levels of stress either in his personal life or work environment, which can often lead him to poor decisions that are out of character. He may be less objective or less disciplined in following the decision-making process he usually trusts. Recognizing high-stress levels can provide the opportunity to intentionally protect against those tendencies. Also, when time is a restricting factor, which often contributes to poor decisions. Unsurprisingly, evidence suggests that when decision-makers feel rushed for time, their judgment often suffers. This is true even when there actually is sufficient time for the decision-making process: just the feeling of a lack of time causes problems. It is important to commit to taking sufficient time for decisions if at all possible (and it usually is). iii.

Cognitive Biases

Even when circumstances are conducive to good decisions and a sufficient supply of accurate information is available, there are still a number of ways in which decisionmakers might be at fault in their manner of judgment. For instance, their perception can be distorted. Understanding how this happens is relevant for managers or any other person because they make many decisions daily. They must also deal with many people making assessments and judgments.


Faulty ways of thinking during the analysis stage are often referred to as cognitive biases. A few common ones follow: a) Confirmation Bias Confirmation bias is the tendency to seek out or prefer information and opinions that we believe will confirm our own judgment. We want to be confirmed, so we pay more attention to information that we think supports us, and we ignore or diminish the significance of information to the contrary. We also tend to accept information at face value that confirms our preconceived views while being critical and skeptical of information that challenges these views. b) Framing Bias Framing bias is the tendency to be influenced by the way that a situation or problem is presented. Framing a message with a positive outcome has been shown to be more influential than framing a message with a negative outcome. c) Hindsight Bias Hindsight bias is the tendency to believe falsely that we would have accurately predicted the outcome of an event after that outcome is actually known. When something happens and we have accurate feedback on the outcome, we appear to be very good at concluding that this outcome was relatively obvious. We seek out or prefer information and opinions that we believe will confirm our own judgment. We want to be confirmed, so we pay more attention to information that we think supports us, and we ignore or diminish the significance of information to the contrary.


d) Anchoring Anchoring bias is a tendency to fixate on initial information and then fail to adjust for subsequent information. When our opinion becomes anchored to that piece of information, we cannot stray very far from it. e) Halo Effect The Halo effect concerns the preferential attitude that we have toward certain individuals or organizations. Because we are impressed with their knowledge or expertise in a certain area or areas, we unconsciously begin to give their opinions special credence in other areas as well. This would, for example, be exhibited when sports stars express their political opinions and the public gives strong weight to what they say. There is no logical reason to think that they have sound political opinions just because they have great skills in the realm of sports. f) Overconfidence Bias Overconfident bias is particularly easy to understand. It basically amounts to the idea that an individual decision-maker trusts his own judgment (usually his intuition) and allows that judgment to override evidence to the contrary. His opinion counts more strongly to him than that of experts who are more knowledgeable and often more than factual data that contradicts his views. From an organizational standpoint, as managers and employees become more knowledgeable about an issue, the less likely they are to display overconfidence. And overconfidence is most likely to arise when employees are considering issues outside of their area of expertise.


g) Status-Quo Bias Some decision-makers prefer to avoid change and maintain the status quo. This desire, perhaps unrecognized, often leads them to favor ideas that do not lead to significant changes. Evidence and ideas that support change are neglected as a result. h) Pro-Innovation Bias Pro-innovative bias is the opposite of the status-quo bias. Rather than prefer things to stay the same, the innovation bias gives preference to any new and innovative idea simply because it represents something new. The feeling is that new ideas must be better than old ones. Even if no objective evidence supports the new idea as useful and helpful, it is still attractive just by virtue of being new. A Systematic Approach for Making Decisions In our real-life situations, decisions can often fail because the best alternatives are not clear at the outset, or key factors are not considered as part of the process. So, in order to stop this happening, you need to bring problem-solving and decision-making strategies together to clarify your understanding. A logical and ordered process can help you to do this by making sure that you address all of the critical elements needed for a successful outcome. Working through this process systematically will reduce the likelihood of overlooking important factors. The followings are a seven-step approach that takes this into account, but this process will ensure that you make a good decision in a complex situation, but it may be unnecessarily involved in small or simple decisions. 1. Create a constructive environment. 2. Investigate the situation in detail.


3. Generate good alternatives. 4. Explore your options. 5. Select the best solution. 6. Evaluate your plan. 7. Communicate your decision, and take action. Let’s look at each of these steps in detail. Step 1: Create a Constructive Environment Decisions can become complex when they involve or affect other people, so it helps to create a constructive environment in which to explore the situation and weigh up your options. Often, when you are responsible for making a decision, you have to rely on others to implement it, so it pays to gain their support. Make sure everyone recognizes that the objective is to make the best decision possible in the circumstances – this is not the time for people to promote their own preferred alternative. Step 2: Investigate the Situation in Detail Before you can begin to make a decision, you need to make sure that you fully understand your situation. It may be that your objective can be approached in isolation, but it’s more likely that there are a number of interrelated factors to consider. Start by considering the decision in the context of the problem it is intended to address. Use the 5 Whys technique to determine whether the stated problem is the real issue or just a symptom of something deeper. You can also use Root Cause Analysis to trace a problem to its origins. Once you've uncovered its root cause, define the problem using Appreciation to extract the greatest amount of information from what you know, and


Inductive Reasoning to draw sound conclusions from the facts. You can also use the Problem-Definition Process to gain a better understanding of what’s going on. Step 3: Generate Good Alternatives The wider the options you explore, the better your final decision is likely to be. Generating a number of different options may seem to make your decision more complicated at first, but the act of coming up with alternatives forces you to dig deeper and look at the problem from different angles. This is when it can be helpful to employ a variety of creative thinking techniques. These can help you to step outside your normal patterns of thinking and come up with some truly innovative solutions. Brainstorming is probably the most popular method of generating ideas, while Reverse Brainstorming works in a similar way, but starts by asking how you can achieve the opposite outcome from the desired one and then turning the solution on its head. Step 4: Explore Your Options When you're satisfied that you have a good selection of realistic alternatives, it’s time to evaluate the feasibility, risks, and implications of each one. Almost every decision involves some degree of risk. Use Risk Analysis to consider this objectively by adopting a structured approach to assessing threats, and evaluating the probability of adverse events occurring – and what they might cost to manage. Then, prioritize the risks you identify with a Risk Impact/Probability Chart, so you can focus on the ones that are most likely to occur. Another way to evaluate your options is to consider the potential consequences of each one.


Step 5: Select the Best Solution Once you’ve evaluated the alternatives, the next step is to make your decision. If one particular alternative is clearly better than the rest, your choice will be obvious. However, if you still have several competing options, there are plenty of tools that will help you decide between them. If you have various criteria to consider, use Decision Matrix Analysis to compare them reliably and rigorously. Or, if you want to determine their relative importance, conduct a Paired Comparison Analysis to decide which ones should carry the most weight in your decision. Decision Trees are also useful when choosing between different financial options. These help you to lay options out clearly, and bring the likelihood of your project succeeding or failing into the decision-making process. Group Decisions If your decision is being made within a group, there are plenty of excellent tools and techniques to help you to reach a group decision. If the decision criteria are subjective, and it's critical that you gain consensus. Decision-makers dislike one another, or there is a tendency for certain individuals to dominate the process. Step 6: Evaluate Your Plan With all the effort and hard work you’ve already invested in evaluating and selecting alternatives, it can be tempting to forge ahead at this stage. But now, more than ever is the time to "sense check" your decision. After all, hindsight is great for identifying why things have gone wrong, but it's far better to prevent mistakes from happening in the first place!.Before you start to implement your decision, take a long, dispassionate look at it to be sure that you have been thorough, and that common errors haven't crept into


the process. Your final decision is only as good as the facts and research you used to make it. Make sure that your information is trustworthy, and that you’ve done your best not to "cherry-pick" data. This will help you avoid confirmation bias, a common psychological bias in decision making. Listen to your own intuition, too, and quietly and methodically test assumptions and decisions against your own experience. If you have any doubts, examine them thoroughly to work out what’s troubling you. Step 7: Communicate Your Decision, and Take Action Once you've made your decision, you need to communicate it to everyone affected by it in an engaging and inspiring way. Get them involved in implementing the solution by discussing how and why you arrived at your decision. The more information you provide about risks and projected benefits, the more likely people will be to support your decision. If people point out a flaw in your process, as a result, have the humility to welcome their input and review your plans appropriately – it’s much better to do this now, cheaply, than having to do it expensively (and embarrassingly) if your plans have failed. Styles of Decision Making Optimizing vs. Satisficing The “fog of war” refers to the uncertainty common on a battlefield. Business is not quite that bad, but they're often isn’t good information for a full analysis. With limitations on information, thoughtful analysis may be impossible. So what’s a decision-maker to do? There are two ends of a spectrum from which to approach this: satisficing and optimizing. Satisficing—a combination of the words “satisfy” and “suffice”—means settling for a less-than-perfect solution when working with limited


information. Optimizing involves collecting as much data as possible and trying to find the optimal choice. Generally, decision-makers don’t pick one or the other—you can think of satisficing to optimizing as a spectrum, and each decision starts with an assessment of how critical it is. A branch of management called management science offers methods for solving complex problems. Intuitive vs. Rational According to Daniel Kahneman, each of us has two separate minds that compete for influence. One way to describe this is a conscious and subconscious perspective. The subconscious mind is automatic and intuitive, rapidly consolidating data and producing a decision almost immediately. The subconscious mind works best with repeated experiences. The conscious, rational mind requires more effort, using logic and reason to make a choice. For example, the subconscious mind throws a ball and hits the target, while the conscious mind slowly describes the physics and forces required to complete the action. Combinatorial vs. Positional Aron Katsenelinboigen proposed this description based on how the game of chess is played. A combinatorial player has a final outcome in mind, making a series of moves that try to link the initial position with the final outcome in a firm, narrow, and more certain way. The name comes from the rapid increase in the number of moves he must consider for each step he looks ahead. The positional decision-making approach is “looser,” setting up strong positions on the board and preparing to react to the opponent. A player using this strategy increases flexibility, creating options as opposed to forcing a single sequence.


Like chess players, businesses can use combinatorial or positional strategies to make decisions. Introduction to Evidence-Based Decision Making Using objective facts as the supporting basis for decisions seems like a sensible approach. However, there is a way to do this that still leaves far too much room for error. Having looked at objective data, it is still far too easy and common to posit unproven theories to explain the data, identify causes, and predict future outcomes. Even if the data itself is reliable, how that data is used remains a key consideration. This is where the idea of “evidence-based” decision making becomes central. Proof of Success The emphasis of evidence-based thinking is relying on actual experimentation to demonstrate that a plan does indeed provide a likelihood of success. Suppose an analysis of data and trends leads a decision-maker to propose a potential course of action. The decision-maker believes the course of action should resolve a particular problem and lead to a desirable outcome. An evidence-based approach asks a key question: has such a course of action been proven to be effective for others in similar situations? This calls for a different type of data collection and analysis. There is today an increased focus on scientific experimentation—or at least as close to scientific as circumstances will allow—to test theories and provide evidence about the effectiveness of different approaches to problems and different business strategies. The medical field provides an example of an area where evidence-based decision making is clearly valuable. Medical professionals work with much scientific and


objective data about the health conditions of their patients, but many professionals believe that many medical practices have too long been subjective in nature. Given the same set of conditions, one doctor might prescribe one treatment whereas another doctor might prefer another. The question becomes that of which treatment has been shown to be most effective in actual practice. By relying on actual evidence of this sort, much of the uncertainty about treatment practices can be removed. Identifying the significance of all the factors involved and finding parallel situations to use as evidence can remain very challenging. Still, evidence-based principles provide one more helpful tool in guiding the decision-making process. Data Collection, Sharing, and Analytics Those who take an analytical and evidence-based approach have at least one significant advantage: there is plenty of material for them to work with. One of the main reasons people have not relied on evidence-based decision making as strongly over the years is that the evidence simply did not exist or was not accessible. Today, however, the advance of technology has resulted in previously unparalleled amounts of data that can be collected, shared, organized, and analyzed in ways never before imaginable. Descriptive Analytics This dramatic increase in the availability of data has led to the rapid development and maturation of the field of data analytics. Much attention has been given to the science of how to analyze this data in a useful way. Today’s massive sets of data are commonly referred to as “big data.� The most basic type of data analytics is known as descriptive analytics. The focus of this type of analytics is simply to understand and describe what has taken place as revealed by data sets.


Predictive Analytics There is another step beyond the basic analytical goal of explaining what the data reveals, though. What if an understanding of past events and trends could be used to predict the most likely outcomes of future data sets and events? If current trends are identified and projected to continue in the future, decision-makers will have access to rich insight that can aid their cause. This work of projecting future trends is known as predictive analytics, and although it still obviously remains only a best guess about the future, it is grounded in objective facts and trends and can provide a greater degree of likelihood as a result. The practice of predictive analytics should also be subjected to the discipline of evidence-based principles. That is, not only should guesses be made about the likelihood of future outcomes based on present trends, but also those predictions should be verified by actual examples from similar situations in the past—as much as possible, at least. When data from many situations have common trends that end up leading to similar outcomes, the consistent pattern provides strong evidence for future results under similar conditions and trends. Decision-making theory Decision-making is usually defined as a process or sequence of activities involving stages of problem recognition, search for information, the definition of alternatives and the selection of an actor of one from two or more alternatives consistent with the ranked preferences.


Decision-making theory is a theory of how rational individuals should behave under risk and uncertainty. It uses a set of axioms about how rational individuals behave which has been widely challenged on the both empirical and theoretical ground. This definition has been offered by the author of an article published in Oxford Concise Dictionary of Politics. The author emphasizes the rationality of individuals and at the same time how they should behave. So we can say that decision-making denotes the formulation of general policy for the management of an organization which may be a business organization or administrative organization. The point to note is that the nature and implementation of decision-making may be different in both places but it remains that in every case the importance of decision-making remains intact. To sum up, the decision-making means the adoption and application of rational choice for the management of the private, business, or governmental organization in an efficient manner. Nature: If we go through the numerous stages of decision-making and the implementation of the decision we shall find that it has certain features, some of which are briefly stated: 1. In one of his writings, Herbert Simon has said that decision or decision making “is a matter of compromise�. Why it is called so? There is a number of alternatives, before a policy/decision-maker and while making a decision he is to select one or more alternatives which will be suitable for him or which will serve his purpose. While pursuing this policy or technique the decision-maker is forced to make compromises and the main aim of compromise is to fulfill the objective of the organization or management.


The compromise becomes inevitable on another ground. The policymaker must see that the policy is not divorced from a real situation and the real situation chiefly relates to the declared policy of the management or government organ. An abstract policy adopted with a lot of fanfare may not come to the benefit of the government department. So whenever the state authority adopts any policy or takes a decision it must see that conflict between the authority and policy will not arise. 2. There must be rationality in the decision-making process. We have just now pointed out that compromise and decision making both are linked with each other. The policymaker makes compromises on the ground that this policy/decision will be a realistic one. Similarly, while a decision is being made the decision-maker must demonstrate utmost rationality. He must consider all the aspects of policy such as elements entering into the policymaking process, the implication of implementation or feasibility of the application, etc. While the decision-maker considers actively all these aspects it will be found that he is rational. A decision should be both subjectively and objectively rational. A decision would be “objectively” rational if it maximized the given values in a given situation, “subjectively” rational if it maximized attainment relative to the actual knowledge of the subject. 3. An important characteristic of decision-making is that it is never the product of a single man. It does not originate from a single brain; it is always the product of several men or brains who work together.


4. Decision-making does not relate to one issue or question but to a number of issues. Some of the categories of decision which have been identified by Wasby: (a) Who made the decision? (b) What was the decision? (c) When was the decision made? (d) How was the decision made? (e) Where was the decision made? (f) What were the characteristics of the decision situation? (g) To what class or subclass of decisions does the decision belong? (h) Why was the decision made? The decisions are never taken in a vacuum. The decisions are made to serve definite purposes/purpose. We have already noted that behind every decision there must be rationality of the decision-maker and there is no place of idiosyncrasy. 5. It has been observed by many scholars that irrationality and rationality conception gives birth to a lot of confusion because the policymaker is chiefly motivated by a real situation which sometimes gives no credence to rationality. In other words, conflict arises between rationality and reality or the general welfare of the body-politic. The policymaker firmly believes that if rationality is given the priority that may jeopardies the prospect of welfare principle and in that situation, the policymaker may be compelled to give his preference for the general welfare consideration. So the dichotomization between rationality and irrationality may appear irrelevant.


However, this issue should not blur the conceptualization of rationality idea because in special circumstances the rationality principle may be neglected but this should never be a general principle. If rationality is not given due importance to the decision-making process and the objective of public utility concerns will be adversely affected.


REFERENCE Making, Module. Discussion: Could These Bad Decisions Have Been Avoided? | Principles of Management. 25 Aug. 2020, courses.lumenlearning.com/wmprinciplesofmanagement/chapter/discussion-could-these-bad-decisions-have-been-avoided/.

The Decision‐Making Process. cliffsnotes.com/study-guides/principles-of-management/decisionmaking-and-problem-solving/the-decisionmaking-process.

Team, the. How to Make Decisions: Making the Best Possible Choices. 25 July 2020, mindtools.com/pages/article/newTED_00.htm.

“Decision-Making Theory: Definition, Nature and Theories.” Political Science Notes, 8 May 2015, politicalsciencenotes.com/articles/decision-making-theory-definition-nature-andtheories/743.


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