Let me throw some light on those aspects of how decisions are made in organizations, what are the useful decision making models, how intuition, judgment, and creativity affect decision making as a whole. *********************************** Decision Making In Organizations***********************************
What Is Decision Making?
It is the process of choosing the right course of action when dealing with a problem or opportunity, normally projected with limited resources and unlimited constraints.
Steps In Systematic Decision Making
1. Recognize and define the problem or opportunity.
2. Set the objectives
3. Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunity within the available resources, which fulfills all the constraints.
4. Choose a right course of action which satisfies your objectives.
5. Implement the preferred course of action. 6. Evaluate the results and follow up periodically as necessary.
The systematic decision-making process may not be feasible in all circumstances where substantial change occurs in the environment and many new technologies prevail. Thus novel decision making techniques lend us a helping hand and may yield superior performance in certain situations. We should always consider the ethical consequences of decision making which is going to build our brand image and goodwill. *********************************** Decision Making Environments***********************************
1.Certain environments
2.Risk environments
3.uncertain environments
1. Certain Environments
These are the situations where a decision maker has sufficient information about the results of each decision alternative in advance of implementation. It is the ideal problem solving and decision making environment.
2. Risk Environments
These exist when decision makers lack complete certainty regarding the outcomes of various courses of action, but they can assign probabilities of occurrence. It is possible to assign probabilities through objective statistical procedures or personal intuition.
3. Uncertain Environments
These exist when managers have so little information that they cannot even assign probabilities to various alternatives and possible outcomes. Thus uncertainty forces decision makers to rely on individual and group creativity to succeed in problem solving. It is also characterized by rapidly changing external conditions, Information technology requirements, Personnel influencing problem and choice definitions. These rapid changes are also called organized anarchy. *********************************** Types of Decisions**********************************
A.Programmed Decisions :
It involves routine problems that arise regularly and can be addressed through standard responses
B.Non-Programmed Decisions:
It involves non-routine problems that require solutions specifically tailored to the situation at hand
*********************************** Useful Decision Making Models***********************************
I.Classical Decision Theory
It views the decision maker as acting in a world of complete certainty. The classical decision maker faces a clearly defined problem, knows all possible action alternatives and their consequences and chooses the optimum alternative. This is often used as a model of how managers should make decisions. It may not fit well in a chaotic world and can be used toward the bottom of many firms, even most high-tech firms.
II.Behavioral Decision Theory
It accepts a world with bounded rationality and views the decision maker as acting only in terms of what he/she perceives about a given situation. It recognizes that human beings operate with Cognitive limitations, Bounded rationality. He faces a problem that is not clearly defined, has limited knowledge of possible action alternatives and their consequences and chooses a satisfactory alternative. It fits with a chaotic world of uncertain conditions, limited information and encourages satisfying decision making.
III.The Garbage Can Model
A model of decision making that views problems, solutions, participants, and choice situations as mixed together in the garbage can of the organization. In stable settings, behavioral decision theory may be more appropriate. In dynamic settings, the garbage model may be more appropriate. The Implications of the garbage can model is that Choice making and implementation may be done by different individuals. Because of interpretation, there is a risk that the actual implementation does not exactly match the choice. Many problems go unsolved. ************************************ Decision Making Realities***********************************
Present day Managers face complex choice processes. The decision making information may not be available. Moreover bounded rationality and cognitive limitations affect the way people define problems, identify alternatives, and choose preferred solutions. Most decision making in organizations goes beyond step-by-step rational choice and falls somewhere between the highly rational and the highly chaotic. Decisions must be made under risk and uncertainty to solve non-routine problems. Decisions must be made under time pressures and information limitations. The decisions taken should be ethically sound.
********************Influence Of Intuition, Judgment, And Creativity On Decision Making********************
>Intuition
It is the ability to know or recognize quickly and readily the possibilities of a given situation. It serves as the key element of decision making under risk and uncertainty.
>Judgmental Heuristics
These are the simplifying strategies or rules of thumb used to make decisions which make it easier to deal with uncertainty and limited information. This can lead to systematic errors that affect the quality and/or ethics of decisions made.
*************************Types of Heuristics*************************
i)Availability Heuristic: Bases a decision on recent events related to the situation in hand.
ii) Representativeness Heuristic :
Bases a decision on similarities between the situation at hand and stereotypes of similar occurrences.
iii)Anchoring And Adjustment Heuristic:
Bases a decision on incremental adjustments to an initial value determined by historical precedent or some reference point. *************************General Judgmental Biases In Decisions Made*************************
1. Confirmation Trap
It is the tendency to seek confirmation for what is already thought to be true and to not search for disconfirming information.
2. Hindsight Trap
It is the tendency to overestimate the degree to which an event that has already taken place could have been predicted. *********************************** Creativity Factors***********************************
Creativity in decision making involves the development of unique and novel responses to problems and opportunities. It is especially important in a dynamic environment full of non-routine problems. *************************Stages In The Creative Thinking Process*************************
1. Preparation.
2. Concentration.
3. Incubation.
4. Illumination
5. Verification.
**************************************** Conclusion****************************************
Thus it is needless to say, in the present day scenario, in the wake of Liberalisation, Privatisation and Globalisation, it calls for the immediate scrutiny of all the managers, while taking decisions as an individual or a group, to keep in mind the consequences, by weighing pros and cons. It is very imperative on their part who shoulders the immense responsibility of protecting the interest of every individual who had a claim on the company, to exercise adequate care and caution, for its long term survival.
Author: J.P.RENIN, Senior Faculty, ICFAI National College, Coimbatore.
Email: dgmpccbe@yahoo.com,
Mobile No. 09842236035
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