Discuss About The Decision Analysis For Management Judgment?
Decision can be defined as the ultimate destination or the point reached after taking into consideration many aspects to resolve an issue. It is the action that is taken in account of solving the problem or initiating something. Decision making is the process that has been followed at the time of making the decisions (Dooley & Fryxell, 1999). It is considered as the very important part in management. This is one of the most important function of management as all the other functions and all the operations that the company does depends on the decision making of the management. As far as the role of managers are considered, it has been analysed that decision making is one of the key roles as managers have to make decision over the things on daily basis.in management terms, a decision making process can be defined as the set of action that are being followed to take out the alternatives in order to achieve the objectives of the organizations. Decisions are required to be made at every level of the organization (Melé, 2010). The organizations need to implement different strategies in their decision making process so that the decisions can be made effective and efficient. It is that function that is the most important drivers of the organization as decision has been made at every point and all the process further in the organization are conducted according to the decision that has been made. Decision making is not the only function that has been conducted by the managers these days but it is the most important function and also the most effective way of achieving the objectives of the organization. In today’s organizations, decision making is so important that it can be used as the replaceable word for management. This is because management means making decision now and then. It is not the scene that only the managers have to make the decision but the employees working under them also have to make decisions in order to manage their work (Aharoni, Tihanyi & Connelly, 2011). As far as the hierarchy of the organizations is considerd, managers have to manage their team and the resources under them. Those human resources also have to manage their work and thus have to prioritize their work accordingly so that they can be completed on time. This requires them to make the decision in order to prioritize (Schweiger, Sandberg & Ragan, 1986). Thus, it is required to assess the factors and the aspects associated with the element on which the decision has been made and also on the situation in which the individual is making the decision. This depicts that decision cannot be made without proper investigation of the associated aspects. The data has been collected and then assessed to make the final decision considering all the aspects that affects the decision making process. It is the futuristic approach and thus it is also required to consider the future aspects to make the decision and it cannot be made considering only the present situations (Dexter, Willemsen-Dunlap & Lee, 2007).
This is the report that discusses about various aspects of decision marketing in management. There are different external factors that can affect the decision making process by the managers in the company. The discussion is also made on some of those factors that ah severe impact on the decisions and have the potential to deviate the decisions. Some of the factors such as heuristics speed up the decision making while other such as social influences and biasness may deviate the decisions made by the managers. This report provides in depth understanding of these concepts and the intensity of the effect of these elements on decision making.
Making decision in the organizations requires an approach to be followed. These approached have some or the other basis. It has been analysed that at the tie of making decision. The mind applies logic, statistics or heuristics. All these elements are the mental tools that are assessed and used to make a decision (Gigerenzer & Gaissmaier, 2011). Logic and statistics are considered as the rational approach of making decision which heuristics falls under the irrational approach of decision making. The rational theory or approach of making decision argues that every element or the aspects needs to be considered at the time of making the decision. The decision can be taken at its best at the situation when all the aspects of the problem has been considered ad various solutions have been made to choose the best one. However, it has been argued that evidences are not always act as the best basis to take the decision. They are not always justifiable. Simon was the one who questioned this theory of rationality among the decision making process and its application in the practical world (Slovic, Finucane, Peters & MacGregor, 2007). Some authors argue that humans at the time of making decision try to opt the easy and simpler method to resolve the issue and not the complex ones. At the time of taking the decision, they generally use to avoid the complex method and go for the simple ones that can provide them better and sorted condition to make the decisions. This method of rationality among the decision making process have been replaced by the researchers with the method of rule of thumb also called as heuristic approach. This approach allows the decision makers to make the decision in simpler circumstances by following the rule of thumb.
There are different approaches that have been identified in order to make the decision in management.
Rational model: it is the model that is based on theories. It is the model that supports the decision making that is optimal in nature (Marewski & Gigerenzer, 2012). In this, the manager needs to make alternative decision and then the optimal is used to be implemented. For this, the managers have to assess all the information and the aspects related to the problem.
Administrative model: It is the model that supports the decision making process based on limited information. In it also called as the model of bounded rationality in which the related information is not present with the decision maker they try to make the good decision but it cannot be optimal one.
Image theory: It is the theory that deals with intuitions. This theory argues that considering all the aspects of the problem to take the decision is not always possible and feasible thus making decisions in the simpler way by considering only the problem is most rapid way to make the decision.
Heuristics can be defined as the simple rule of thumbs for resolving the issues and making the decisions. Heuristics is the strategy of making the decision that partly ignores the information to reduce the decision making efforts. The gaols of considering the heuristics in making decisions results in considering less cues and information at the tie of making decision so that the decision can be made quickly (Birnbaum, 2008). There are different types of heuristic such as availability and representative heuristics that are most commonly used in the management to make the decisions. Representative heuristics is generally used when the characteristics of the individual is involved and the judgement needs to be given for a person while availability heuristics deals with ignoring one or the other information that is not available to make the decision.
Sometimes, it is known that what will be the exact probability that leads to best outcomes. In that case, the judgment can be made by taking heuristic in considerations. These are the general strategies that are used to resolve the problems (Shah & Oppenheimer, 2008). Till 1970’s, it is the approach that was found to be very effective in making decisions in case where the logics cannot work. From the last 25 years, it has been analysed that heuristics definition had changed over the time. It has been considered as the most unreliable method of making the decisions. The study of logics in decision making has found that using heuristics results in inappropriate decisions that do not consider the related aspect of the problem. It has been believed that heuristic in the decision making restrict the managers to take the correct decisions.
Although heuristics are making deviation in the decisions but still some of the recent researchers suggests that the decision makers in the management are using such approach to take the decisions. It is accounting that heuristics cannot provide the optimal solution for the problem but have accuracies that are very much close to the more complex decision rules. It has been analysed that the most usable heuristics these days is the “Fast and frugal” approach of decision making (De Martino, Harrison, Knafo, Bird & Dolan, 2008). This is the heuristic approaches that speed up the cycle of making decision reduce the efforts in the cycle. It has been said that in this world of dynamic environment, it is not always feasible to use complex tools and method to resolve the complex problems. Sometimes, simple methods can also do wonders. For example, Apple Inc. is the company that always consider only the latest technology to make the products and not the customer related issues. Many a times, management needs to make the decisions in highly uncertain situations. These situations have so many attributes associated with them (Dean & Sharfman, 1996). Many of the decision makers generally make decision by considering some of the most relevant attributes whose information easily available to them. Samsung is the company that has faced the issue of battery explosion in one of its mobile device. The company immediately took the action of replacing the devices without considering other factors. In addition to it, it is not necessary that they will use systemic approach always to make the decision. They just rely on the information that is with them and go with their gut feeling that is farmed after analysing the information available. It has been analysed that considering this approach results in reduced efforts of the decision maker that makes the decision making process fast and quick. This is because the decision maker is not wasting time in finding the data related to all to attributes while making the decision based on the most relevant attributes and the information available (Hilbig, Erdfelder & Pohl, 2010). The result of using heuristics is effort-accuracy and time trade-offs. This is because using this approach helps in reducing the time and efforts of making decision but at the cost of accuracy. Thus, it can be said that using this approach helps in speeding up the process of making the decision. As far as the type of heuristics is considered, it has been analyse that availability heuristics is the best approach to use at the time if the decision need to be quickly taken.
Resolving the issues is the very common practice that is conducted by every organization at every level of management. This practice of resolution of the issues requires the management to make the decisions. It has been analysed that there are gaps between theory and practice of effective decision making process (Strough, Karns & Schlosnagle, 2011). In actual practice of the decision making process, there are some assumptions and biases that affect the process and deviates the decision that has been made. Traditional methods that were related to decision making considers logic and rationality. Although these methods provides better ad accurate outcomes to the management but it is rarely practiced these days. This is because of the external factors that somehow affect the decision making in this dynamic organizational environment. It has been analysed that decision making process at the organizations vary according to the situation and the type of problem that needs to be resolved (Masicampo & Baumeister, 2008). There are different kinds of biases that affect the decision making process and deviates the decision of the management. Some of them are discussed below:
It has been analysed that it is not possible for the mangers to attend all the information that is available for them at the time of making the decisions. They generally believe in focusing on the information that is interesting and related to the issue. Information that has direct impact on the decision maker is more vivid in nature and thus decision maker tries to take that information and consider the same for making the decision (Cokely & Kelley, 2009). When managers have to make the decision, they usually consider the information that has been heard and seen by them rather than by others. The information that is heard and see by self remains in the memory for long time but it is not possible for the manger to rely on the information that has been observed by the This generates biasness among the managers regarding the information.
Most of the time when the decision has been quickly then the managers have to rely on the first piece of information they get (Bryant, 2007). It may be possible that it gives a wrong impression but it becomes the mind-set of the manager and he or she makes the decision considering only that information. It has been analysed that this acts as the bias that deviates the actual result or decision.
It has been analysed that when a similar type of information is provided by the different people again and again it become reliable even if it is wrong or not appropriate. This can be termed as the power of group thinking. If in a group, most of the people have similar thinking then it affects the thinking of all the people and also a type of biasness have been created in the decision that has been made in the end (Gigerenzer, 2008).
It is the major and the most important bias that generally develops at the time of making decisions sometimes, the managers themselves does not have any idea about their own biasness. This also becomes a bias itself and affects the decision every time.
As discussed above that heuristics are the strategies that deviates the decision from the actual as it does not consider every attribute that is associated with the issue (Weber & Johnson, 2009). It has been discussed that heuristics speeds up the decision making process but also introduce errors in the decisions. It is the not always true that if something has worked in the past situation then the same approach can be implanted to the resent situation. Relying on those existing heuristics results in deviated outcomes.
Representative heuristic biasness: it is the approach that is related to comparing the present situation with the past situations. In this type of approach, the managers compare the issues occurred in the past with the present ones and apply the approach that was used in past if there is similarity in the issues has been found (Wilson & Dowlatabadi, 2007). This creates biasness as it is not necessary that the other factors that area associated with the issue are also similar.
The availability heuristics: This is also the factors that create biasness in the decision. It is the situation where the managers take the information that is available to make the decision and does not try to collect the information from other sources. The information that is easily came to mind is more relevant can be taken to make the decision over the issue (Hilbert, 2012).
Choice supportive bias: It is the bias developing situation where the choice deviates the decision. If a person has a particular choice then he made the decision in favour of that choice always even if the choice has flaws. Those flaws can be neglected at the time. Thus, the decision that has been made by the mangers is biased in this case. For example, if a manager has to take decision over the increment, he prefers to give high increment to the employees of his choice and thus a biased decision is being made (West, Toplak & Stanovich, 2008).
Clustering illusion: this is the situation where the decision maker used to rely on the random events to determine a pattern that can be followed. This also creates a bias as every situation is not same and every problem cannot be solved with the random pattern game.
Confirmation bias: every person has some preconception in about some of the issues. When the individual or the manager has to deal with that issue having a preconceived view about the same. They manage will definitely listen to the things that is relevant to this perception and make the decision accordingly (Botvinick, 2007). This generates a biased decision.
Outcome bias: It is the type of bias in which the managers of the company made the decision according to the outcome of the issue. Taking the decision as per the outcomes may be wrong. The decision but the managers should be taken according to the situation and not the outcome.
The dilution effect: It has been analysed that if the decision needs to be made by the management, they should consider only the important and the relevant information. This is because the non-relevant information dilutes the effect of the relevant information. For example, it has been announced in the company that everyone is going to get the appraisal on the basis of their performance. One of the employees is performing very well but has some issues in the social interaction with the other employees (Han, Lerner & Keltner, 2007). This may portray him as a bad person and it may be possible that the manager takes decision against him and he may not get the appraisal according to his performance. Thus suggests that the irrelevant information about his personal relation has diluted the relevant information of performance in the company
All the above discussed bias suggests that there are various outside factors other than the issue and the related attributes that affect the decision of the management in the organization. This is because even though these factors do not affect the decision directly but they somehow affect the decision making process and thus the final decision get affected by that (Gold & Shadlen, 2007).
It has been analysed that decisions cannot be made in vacuum. The organizational decision as well as the individual decision made in the context of the environment surrounding the decision makers. Thus, the decision makers have to take into consideration many factors that are directly or indirectly affect the decision issue (Brodbeck, Kerschreiter, Mojzisch & Schulz-Hardt, 2007). One of the factors that have the major impact on the decision making of the organization or the management is social context.
As the decision makes in the organization get the information from other social elements either by the facial expression of the other person or by directly getting the information. The decision makers have to consider such aspects of social interaction in their decision making process (Green, Carney, Pallin, Ngo, Raymond, Iezzoni & Banaji, 2007). Decision making is not only the process of logics and simulation but the social factors such as emotions of the person, the impact of the colleagues and other stakeholders of the company etc. There are different social factors that can affect different types of decisions made in the organization.
Social beliefs of the stakeholders:
There are many stakeholders to the company such as employees, customers, shareholders etc. every individual have different social beliefs and thus the decision that are being made in the organization have to be such that does not hurt the sentiments of any of these stakeholders of the company (Saaty, 2008). Thus, the management has to consider their point of view in the decision.
Employees: employees are the biggest asset to the organization. It has been analysed that management has to consider the conditions and the situations of the employees at the time of making any decision (Hwang & Lin, 2012). Various examples can be quoted to understand the same. Suppose, if the manager has to train and motivate the employees, he has to make the training or motivational plan for the employees. It is not necessary that every employee can be motivated by on factor or plan thus a plan that has been executed needs to involves all the aspects so that an optimum plan can be made (Tzeng & Huang, 2011).
Customer behaviour: Behaviour of the customers is also a social factor that affects the decision making criteria of the management. It has been analysed that customers behaviour change according to their beliefs. The organizations that operate in multiple countries found it as the challenge etc. takes decision over the strategies that need to take in order to release the products and the marketing practices. This is because the social values and beliefs of different country people are different and thus this affects the strategic decision of the company. When the company has to take the products decision, it is required to keep in mind the choice of the customer at that place where the products will release. It is also required at the same time to market the products in a way that does not harm any of the ethical values and moral values of the people (Zanakis, Solomon, Wishart & Dublish, 1998).
Shareholder role: It has been analysed that shareholders are the biggest part of the company that provides support to the business practices. Several decisions have been made in the company but consideration of the shareholder’s value is also very important.
Income distribution: It is also another social factor that can affect the decision of the company or the management. This is the factors that affect the strategic decision of the company that needs to be taken regarding the products and the services offered to the market by the company (Eisenhardt & Zbaracki, 1992).
Other competitors: The Company operates in the industrial environment. That environment has various factors and these factors have their impact on the decision making. Suppose of the company has good relation with one of its competitors, them the management has to make such decisions that does not harm that particular company (Xu, 2015). On the other hand if the company has personal rivalry with another company then it may be possible that management of the company make such decision that attacks that particular company of the industry.
Group think: group think is the process in which members of the team sits together and take out the decision (Lunenburg, 2011). This helps the organizations come up with many alternatives to solve the issue but it has been observed that the decision of majority become the thing of all. This may skew the actual outcome that should be made. This is because the people who are more influencing influence other people also to support their views (Trevino, 1986). This influence deviate the decision of the members as well as the whole group.
Above all factors suggests that there is an impact of external factors on the management decision. This is because the management of the company has to take into consideration many attributes that are associated with the issue on which the decision has been made. It has been analysed that only the logics and the quantitative simulation cannot be problem to take the decision. The people around the decision makers and the social beliefs deviate and skew the decision making process irrespective of which type of decision is been taken. Intuition also plays major roles in decision making (Jones, 1991). The experiences of the person develop kind of perception in them that integrates with the decision process and thus skew the decision at the end. Social factors affect the decision making process because it is the major factors that is considered at all the levels of life. Even the personal and individual decision is greatly affected by the social factors. Different people have different beliefs and thus decision that has been made in the organizations having diverse workforce should be efficient enough and should consider all the social views bad beliefs of the people (Simon, 1979).
Conclusion:
The report concludes that decision making is the process that deals with making the decisions and taking out the solution of the issues available. It has been analysed from the report that decision making is the very important function of the management in the company but is cannot be taken in vacuum (Hambrick & Snow, 1977). The decision making process gets affected by many of the factors. Heuristics is one of the approaches that have been discussed that skew the management decisions. Heuristics is defined as the conditions that are the simple rule of thumbs that solve the problems. There are different types of heuristics discussed in the report such as representative, availability etc. These heuristics are considered as the element that speeds up the process of decision making by eliminating the steps of considering all the data and information associated with the issue. Another part of the report concludes that heuristics also develops biasness in the decisions. Other than heuristics there are some other cognitive biases that affect the decision making such as group think, anchoring bias, vividness bias etc. Biasness skew the decision and the change its meaning. It has been analysed that decision that are taken under biasness are not that much effective and fair. In the organizational point of view, it has been analysed that the decision maker should try to understand the factors that develops bias for them and should remove the same. Some of the social factors also affect the decision making process of the management. This is because the decision is made for the society only and any of the decision that is made should not be against the society. It has been analysed that only the logics and the quantitative simulation cannot be problem to take the decision. The people around the decision makers and the social beliefs deviate and skew the decision making process irrespective of which type of decision is been taken. Intuitions also play a major role in decision making.
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