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As managers and entrepreneurs, we should have confidence in our decisions, but can we? Discuss with regard to your ability as a decision maker and the tools and methods available to assist decision making.
Entrepreneur and managers are no longer able to have confidence in their decision. Because even good managers make mistakes in their decision making process. Therefore, there are many of the business organisations trying to find out the best method of decision making process. Nevertheless, many of them experience end in failure or sink in the business world. Because, decision making of organisation, as it operates with in the organisation, implies that increasing unexpected complexity in environment uncertainty. And this uncertainty means that decision makers do not have sufficient information about environmental factors, and they have a difficult time predicting internal or external changes. So, uncertainty increases the risk of failure for organisational responses and makes it difficult to compute costs and probabilities associated with decision alternatives. Therefore, any organisations want to success in their business, it is essential to use suitable decision making tools and methods. To understand this essay better, defining the term of decision making is necessary. According to Fitzgerald, decision making involves the choice of an alternative from among a series of competing alternatives (2002, p. 8). And theories of decision making are concerned with how such choices are made. This essay will explain nature of decision making, tools and methods of decision making process and steps in decision making to assist decision makers. Finally, availability of those tools and methods by managers and entrepreneurs will be discussed to assist their decision making process.
First of all, nature of decision making should be identified before it discusses about its tools and methods. The definition of decision making is explained in introduction. However, decision making conditions are should be concerned before the actual decisions have been made because the decisions are not always made under same amount of available information (Rue & Byars, 2007, p. 76). The conditions which give influence to decision making process are: certainty, risk and uncertainty.
Situation of certainty means that decision maker knows every alternative outcome from the decision so he/she can make decision precisely. For example, if manager have to make decision on which transport service he/she will use between by air or by train to deliver their product or service, it is obvious that air will take relatively shorter time but higher cost than train, and train will take longer time but lower cost than airplane.
Unfortunately, each alternative brings different outcomes and this is not always known in advance. Therefore, decision makers are only able to estimate their relative probabilities of outcomes. According to Williams, perception of risk means the amount of uncertainty or lack of predictability concerning the outcome of a decision (2002, p. 86). This is called a situation of risk. Generally, exact prediction about probabilities of various outcomes is impossible. Thus, managers may make their decision based on past experience and historical data. However, Russo and Schoemarker said people do not learn easily from experience because is requires pro-found skills (1990, p. 174). Although, risk can never be eliminated from decision making process, decision makers can attempt to minimize its impact on their outcome with technique of learning from experience and forecasting from historical data.
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When there is very little or no reliable information to estimate the variety of possible outcomes fro decision maker, this is called situation of uncertainty. Moreover, this means that the decision maker does not have any knowledge that concerns the possibilities related with different outcomes. In this circumstance, decision maker may take one of several approaches. First approach is the maximax approach. Rue & Byars “selecting the alternative whose best possible outcomes is the best of all possible outcomes for all alternatives” (2007, p. 77). In the second approach, the maximin approach refers “comparing the worst possible outcomes for each alternative and selecting the one that is least undesirable” (Rue & Byars, 2007, p. 77). And the last approach is the risk-averting approach. This approach can be resulted in more effective planning because it is chosen by the alternative with the least fluctuation among its possible outcomes (2007, p. 78).
The conditions for decision making occupy important position in decision making process by guiding decision makers which decision making model they should use. Therefore, decision makers should keep in mind those conditions before they make actual decision for organisations.
Decision making tools and methods in decision process support decision makers to understand complex phenomena in managerial activities. Those tools and methods are able to maximise managerial options within decision making process specifically and describe its situations clearly. The tools are for fostering making creative decision. And the methods have rational and intuitive methods for effective decision making. By using these tools and methods, the triple bottom line and manager’s corporate social responsibility should be concerned together.
According to Williams, creative problem solving is not easy and applying the tools requires time, resources, and effort (2002, p. 149). However, to improve the quality of organisation’s important decision making process, creative decision making techniques are essential. These techniques are such as brainstorming, Gordon technique, nominal group technique, and synectics. Brainstorming can be explained as producing a large quantity of solution on a problem to find out its solution among them. By using this tool, there is initially no criticism and question of idea should be allowed. Then combinations of solutions can be used as decision making tool for improvement of organisation.
Gordon technique is similar with brainstorming but it can be differ from that group leader knows the exact nature of the real problem under consideration (Rue & Byars, 2007, p. 84). Nominal group technique is involving few steps as highly structured technique. The order of steps is listening – recording – voting-discussion – final voting. This technique minimizes personal interactions to maximize their activity and reduce pressure from conformity with group decision. The synectics is a relatively new technique used in creative decision making process. This technique uses metaphorical thinking to “make the familiar strange and the strange familiar” (Rue & Byars, 2007, p. 85). None of those techniques is a perfect tool for assisting decision maker’s activity. Each technique should be considered as a just tool that can facilitate proper decision making process by decision makers.
Rational decision making method is the most pervasive and influential and to use rational decision making effectively, this includes the following steps: recognising and defining the situation, developing alternatives, evaluating alternatives, selecting the best alternative, implementation, and follow-up and evaluation (Robbins, Bergman, Stagg, & Coulter, 2006, p. 208-212). First, when problem exist, it is necessary to find out what kind of problem it is including organisations current situation. The gap between the current situation and existing problem can be identified in this step. Second, developing alternatives is for finding a cause of problem in the situation and gathering information concerning the current state of affairs. Third, evaluating alternatives has a role for helping decision maker to evaluate a solution from among the available alternatives. Forth, selecting the best alternatives is choosing the best option from among the evaluated alternatives. Fifth, implementation refers that decision maker is putting the decision he/she chosen into actual organisational activities. Sixth, the last step is evaluating the effectiveness of the implemented decision by decision maker. These steps assist decision maker to optimize organisation’s outcome. Fitzgerald believes that “embedded within the rational model is the belief that managers actually optimize their decision making behaviour by deliberately choosing and implementing the best alternatives” (2002, p.13). On the other hand there are similar but slightly different approach is included in rational method. That is satisficing approach. The difference between optimizing approach and satisficing approach in rational method is satisficing is selecting the first alternative that meets the decision maker’s minimum standard of satisfaction instead of selecting the best possible alternative from among every possible alternative (Rue & Byars, 2007, p. 74).
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Intuitive decision making method is used when decision maker decide organisational decision bases on hunches and intuition (Robbins, Bergman, Stagg, & Coulter, 2006, p. 216). Moreover, Robbins, Bergman, Stagg, & Coulter defined intuitive decision making as “a subconscious process of making decisions on basis of experience and accumulated judgement” (2006, p. 216). That means an emotional decision is put into action by decision maker from their mind in decision making process. The emotional attachment can lead manager to poor decisions or can be very real especially who are “living in the past”. However, the key is manager should not ignore when the available information exist. Intuition plays an important role in decision making process. Consequently, it can be said manager’s experience and judgement is important when he/she faces the decision making situation. Learning from the past is not easy but once it has become your knowledge, it can be important resource for decision making as a decision maker (Williams, 2002, p. 153).
In conclusion, this essay discussed about definition and conditions of decision making. The different conditions such as certainty, risk and uncertainty give different influence on decision making process. And the tools and methods have been identified as that can promote improvement of organisation by decision making and several steps in decision making methods to assist decision managers and entrepreneurs. The tools in decision making process allow improving the quality of organisation’s important decision. Then the methods in decision making are more related to assist decision makers to put one of the possible alternatives on actual action. Decision making process can be improved by recognising conditions of decision making and applying appropriate tools and methods to problems decision maker is faced. To be effective and efficient in decision making process, managers need to be open to new information and other’s opinion. If managers and entrepreneurs apply creative and sufficient decision making skills in their decision making process, there are various solutions to achieve their goal or overcome their problem will be allowed without failure in decision making.
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