Decision making

  • Category:
    Management
  • Document type:
    Essay
  • Level:
    High School
  • Page:
    2
  • Words:
    1495

Management: Decision making

Decision making

Introduction

Managers, on a daily basis have to make millions of decisions in order to keep the organization running, whilst keeping an eye on achievement of the organization’s objectives. In fact, to be realistic, managers are not theoretical and therefore won’t act theoretically, but simply need to act or function realistically given the fact that the business environment is dynamic and full of uncertainties (Pina E Cunha, 2007). The reality is that managers need to make decisions under various environments, ranging from the environment of certainty, environment of uncertainty to environment of risk. Similarly, manager’s decisions are either made rationally or intuitively. However, in as much as most managers tend to use the rational or systematic decision making techniques, the effectiveness of the intuitive decision making technique can’t be trashed. Rational or systematic decision making technique is used fully especially in instances where there is need of the intended choice to meet the requirements of consistency and completeness conditions, but the challenge is that the technique doesn’t fully explain the reasons behind why people make decisions. Psychologists, however, believe that some decisions are made courtesy of more distinct and subjective criteria, which incorporate intuition, emotions and judgments (Kaufmann, Meschnig, & Reimann, 2014). There are instances where making intuitive decisions prove to be beneficial as compared to making rational or systematic decisions.

While managers commonly use systematic thinking to make decisions, intuition is more beneficial in certain situations and may be a legitimate basis for decision-making.

This essay will outline the various decision conditions in which intuitive decision making may be more legitimate than rational decision making.

Decision making

Definition of decision making

Decision making refers to the process of identifying the best alternatives, often from a wide variety of alternatives, based on the decision maker’s preferences (Al-Tarawneh, 2011). Decision making therefore implies that an individual chooses the best alternative from a multiple of alternatives, guided by goals and objectives. In the opinion of Al-Tarawneh (2011), decision making should first with making an identification of who the decision maker and the relevant stakeholders are. This helps in ironing our possible problems that are likely to occur, relating to the definition of the problem, objectives and the possible criteria to be used (Al-Tarawneh, 2011).

Conditions under certainty

This is a decision making environment where the decision maker has the required information needed to make a decision. In decision making under certain conditions, the manager or rather the decision maker has a predetermined understanding on what the outcome of a certain decision will be, because of predetermined knowledge and understanding regarding the situation and the nature of the problem (Ferrell, Fraedrich, & Ferrell, 2010). In fact, in most cases, the solutions to the existing problem are readily available from past experiences. For example, making a decision to restock goods because goods in the store have goon below a certain established level is an example of a decision under certain condition.

Conditions under risk

Decision making under this condition or environment is bound by the probability of outcomes or results for various decision alternatives because the environment isn’t known well in advance (Ferrell, Fraedrich, & Ferrell, 2010). This is a form of decision making environment which is faced by decision makers on a daily basis, unlike the condition of certainty because in as much of information could be readily available in the public domain, the available information might not be enough to offer solutions to all prevailing problems.

Condition under uncertainty

Under conditions of uncertainty, the information available to the decision maker is incomplete, with many possibilities of predicting future outcomes. Therefore, under this environment, the decision maker can’t predict with certainty, the outcome of a certain alternative. This scenario is often based on the assumption that the decision maker has no intuition to assist in the assignment of probabilities to various states of nature (Ferrell, Fraedrich, & Ferrell, 2010).

Rational or systematic decision making

Meaning of rational decision making

This is decision making criteria that involve a systematic selection of possible choices based on facts and logical reason. In a rational or systematic decision making process, there is a clear application, by the decision maker, of the analytical techniques of possible outcomes of a certain decision before setting on the best course of action (Pina E Cunha, 2007).

Conditions under which rational decision making approach would work

Rational decision making, being a decision making technique based on facts and reason, is suitable under a number of conditions.

  1. In instances where there only one best outcome because rational decision making technique seeks to maximize on utility.

  2. In instances where there is need to of the intended solution to be in line with the decision maker’s preferences.

  3. In instances where there is need of the intended choice to meet the requirements of consistency and completeness conditions.

  4. In instances where the decision maker needs to achieve an objective and an unbiased outcome since it is based on facts.

  5. In instances where there is need to address risk and possible uncertainties with approaches which are mathematically sound.

Examples

An example of a practical application of rational decision making scenario is a case where an organization’s supply team has to critically examine and consider various factors in supplier selection. Especially due to the dynamism in business operations, rational decision making in supplier selection is key since prior knowledge of information plays a vital role (Kaufmann, Meschnig, & Reimann, 2014).

Intuitive decision making

Meaning of intuitive decision making.

According to Bocco & Merunka (2013), intuitive decision making refers to an instance where a decision is arrived at by the decision maker, without following any sequence at all, and lastly arrives at a decision or knowing with unconscious reasoning. Ideally, intuitive decision making involves a case where one receives ideas from a source he or she can’t understand or know.

Conditions under which intuitive decision-making is more legitimate

Intuitive decision making, being a decision making technique which involves making decisions unconsciously, is suitable for some situations and unsuitable for others (Pina E Cunha, 2007). This decision making technique is suitable in instances where the decision to be made is of low value because the consequence of the decision won’t have detrimental effects. The other instance where intuitive decision making technique is applicable is in cases where the decision maker needs to make decisions based on emotions. Lastly, in instances where speed is paramount to achieve a successful output, intuitive decision making technique is important.

Examples

A very good instance of the intuitive decision making moment is in instances where entrepreneurs, after starting their businesses, need to quickly adapt to their business environments, adapt into a suitable style of reasoning in the industry and should be suitably driven by the effect (Pina E Cunha, 2007). Similarly, choices made by the first people to arrive at a scene of crime is another example of intuitive decision making instances.

Conclusion

With the use of rational decision making technique, most often, decision makers fail to understand the reasons that underlie the selection of a given outcome, commonly affected by intuition and emotions. Similarly, the rational decision making technique is equally unsuitable in instances where the time limit of an outcome is crucial. Intuitive decisions, mostly unconsciously made, are part of the day to day running of an organization. In fact, the assumption held by the rational decision making technique that human beings make rational decisions is not ideally true. This is because there are decisions often affected or influenced by factors which are not necessarily rational. Therefore, intuition is more beneficial in certain situations and may be a legitimate basis for decision-making, especially owing to the nature of dynamism experienced various operating environments.

Therefore, it can be recommended that Managers should not always rely on rational or systematic decision making technique, but also adapt intuitive decision making technique because different scenarios necessitate the use of different decision making techniques. Managers should also develop structures flexible enough to allow them to make decisions under pressure. Furthermore, Managers must understand that not all decisions made are rational, and therefore develop measures that ensure that all factors affecting decisions are taken care of.

Reference

Al-Tarawneh, H. A. (2011). The main factors beyond decision making. Journal of Management Research4(1), 1-18.

Bocco, B. S., & Merunka, D. (2013). Do leaders of small and medium-sized businesses base decisions on intuition? An empirical investigation among West African managers. Global Business and Organizational Excellence32(5), 45–52.

Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2010). Business ethics: Ethical decision making and cases (8th ed.). United States: South Western Educational Publishing.

Kaufmann, L., Meschnig, G., & Reimann, F. (2014). Rational and intuitive decision-making in sourcing teams: Effects on decision outcomes. Journal of Purchasing and Supply Management20(2), 104–112.

PINA E Cunha, M. (2007). Entrepreneurship as decision making: rational, intuitive and improvisational approaches. Journal of Enterprising Culture15(01), 1–20.

Reneke, J. A. (2009). A game theory formulation of decision making under conditions of uncertainty and risk. Nonlinear Analysis: Theory, Methods & Applications71(12), e1239–e1246.