Decision Making is a Process

Whether a decision is programmed or non-programmed and regardless of the manager’s choice of the classical, administrative or political model of decision making, some steps typically are associated with effective decision processes.

Managers confront decision requirements in the form of either a problem or an opportunity. A problem occurs when organizational accomplishment is less than the established goal or some aspect of performance is unsatisfactory. An opportunity exists when managers see potential accomplishment that exceeds specified current goals. Managers see the possibility of enhancing performance beyond current levels.

Awareness of a problem or opportunity is the first step in the decision sequence and requires surveillance of the internal and external environment for issues that merit executive attention. This resembles the military concept of gathering intelligence. Managers scan the world around them to determine whether the organization is satisfactorily progressing towards its goals.

Some information comes from periodic financial reports, performance reports, and other sources that are designed to discover problems before they become too serious. Managers also take advantage of informal sources. They talk to other managers, gather opinions on how things are going and seek advice on which problems should be tackled or which opportunities embraced.

Recognizing decision requirements is difficult, because it often means integrating bits and pieces of information in new ways.

Once the problem or opportunity has come to a manager’s attention, the understanding of the situation should be refined. Diagnosis is a step in the decision making process in which managers analyse factors associated with the decision situation. Managers make a mistake here if they jump right into generating alternatives without first exploring the cause of the problem more deeply.

Extensive studies of manager decision making, recommend that managers ask a series of questions to specify underlying cause, including the following:

–What is the state of disequilibrium affecting us?
–When did it occur?
— Where did it occur?
–How did it occur?
–To whom did it occur?
–What is the urgency of the problem?

Such questions help specify what actually happened and why.

The problem of losses in a food company is an urgent one, as the stock price fell 60 per cent in three years, sales and profits declined and quality and service was lagging behind rival fast food restaurants. Manager examine the multitude of problems facing the fast food  giant, tracing the pattern of the decline and looked at the interconnectedness of issues such as change in eating habits, a struggling economy, increased competition, poor headquarters planning, weak control systems, a decline in training and evaluation for franchisees. Once the problem or opportunity has been recognized and analysed, decision makers begin to consider taking action. The next stage is to generate possible alternative solutions that will respond to the needs of the situation and correct the underlying causes.

For a programmed decision, feasible alternatives are easy to identify and in fact usually are already available within the organization’s rules and procedures. Non-programmed decisions, however, require developing a new course of action that will meet the company’s needs. For decisions made under conditions of high uncertainty managers may develop only one or two custom solutions that will satisfy handling the problem.

Decision alternatives can be thought of as the tools for reducing the difference between the organization’s current and desired performance.

At the food company, executives are considering alternatives such as using mystery shoppers and unannounced inspections to improve quality and service, motivating demoralized franchisees to get them to invest in new equipment. Encouraging franchisees to help come up with successful new menu items.

Once feasible alternatives have been developed, one must be selected. The decision choice is the selection of the most promising of several alternative courses of action. The best alternative is one in which the solution best fits the overall goals and values of the organization and achieves the desired results using the fewest resources. The manger tries to select the alternative with the least amount of risk and uncertainty. Because some risk is inherent for most non-programmed decisions, managers try to gauge prospects for success. To make decision about how to cope, managers rely on the company’s values and goals of treating employees right and building long term relationships. Not a single employee was laid off and although bonuses were reduced the company issued them a week early to help employees hurt by the trading decline.

Making choices depends on manager’s personality, factors and willingness to accept risk and uncertainty. The level of risk a manager is willing to accept will influence the analysis of cost and benefits to be derived from any decision. A risk taker would go for the victory, build a plant in a foreign country or embark on an acting career.

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