Perspectives and Techniques of Decision Making - Assignment Example

? DECISION MAKING ………………………….. College ……………………………… ……………….. Words count: 2653 Table of Contents Table of Contents 2 Introduction 3 Decision making Process 3 Fundamental Perspectives and Techniques of Decision Making 5 Rational perspectives of decision making 5 Behavioral Perspectives of Decision making 6 Group Decision Making Perspectives 7 Steps in decision making process 9 Personal Reflection on Decision Making in Telstra 10 Brainstorming in Telstra’s group decision making 11 Conclusion 12 References 13 Introduction Decision making is a very common personal activity that people do every day for resolving life’s daily problems and a crucial managerial function that managers, business executives and other stakeholders carry out several times in a day. Managerial decision making is becoming an increasingly complex task due to technological, political and social factors that largely affect the business and its environments. In the contemporary uncertain business contexts, making a decision which has certainly long-term implications on business requires thorough understanding of all possible future situations and more importantly the managerial ability to balance both controllable and uncontrollable parameters (Bhushan and Rai, 2004, p. 3). Managerial decisions are key factors to influence a firm’s success and failure. Managers need to ensure that their firms are able to continually innovate and get accustomed with changing business environments so that it can maintain a reasonable stance and pace in competitive edge. If managers want their firms to survive in the dynamic and uncertain business conditions, they need to carry out effective decision making processes. This paper presents various decision making perspectives and techniques based on relevant literature and reflects to the personal decision making experience in a workplace to apply the theoretical underpinning to the empirical evidence. Decision making Process Decision making is about deciding what specific action to take from a set of two or more options available to solve a particular issue. It is thus a process whereby people attempt to solve a problem through creative thinking and logical reasoning. Creative thinking aims at bringing newer ideas whereas problem solving is directed to find a solution, an answer or a conclusion (Adair, 2010, p. 1). An individual or organizational decision is the end result of much more dynamic processes and a series of activities labeled as ‘decision making’. McGrew, Wilson & Wilson (1982, p. 5) stated that the decision maker, in his decision making process, identifies the problem, clarifies particular goals that are desired, examines various possibilities for achieving the desired goal and finally completes the process by taking a definitive choice of action. Decision is therefore an answer to a specific question or some problems or a choice between two more courses of actions. Ahmad, Hasnain and Venkatesan (2012, p.21) described a five-stage process for decision making. It comprises of identifying all alternatives, valuing these different choices according to preferences and potential outcomes, assembling the information, choosing among the preferences and outcomes and finally selecting the most favourable and appropriate choice. Decision that has been taken after careful coordination of information, evaluation of potential outcomes and analyzing of various preferences based on advices, suggestions and help of people involved as members in a group-decision making has been found to be very effective in terms of its appropriateness and positive outcomes. Decision making is a cognitive process that involves logical reasoning and creative thinking about choosing a specific course of action that is supposed to bring the decision maker to a certain result. One of the key challenges in decision making is reducing or eliminating the uncertainty. A better way to avoid uncertainty is to collect relevant information before making a decision (Vermeulen & Curseu, p. 1) so that the outcomes and risks associated with a particular decision can be foreseen and evaluated. When it comes to management perspectives, decision making is at the heart. It is an extremely important component and strategic technique that managers need to take in to account for the better accomplishment of all of its functional areas such as planning, coordinating, directing, and controlling and so on. Decision making is a process of thought and deliberation as that always leads to a final decision that is meant for achieving the predetermined goals or organizational objectives. Decision making is a dynamic process and that often involves several processes and managerial functions. The feasibility of the decision making largely depends on the nature of the problem to be solved, the availability of resources, characteristics of decision-maker, the cost and time pressure etc (Al-Tarawneh, 2012, p. 5). Fundamental Perspectives and Techniques of Decision Making Griffin (2011) identified three perspectives for decision making process, namely rational perspectives of decision making, behavioral aspects of decision making and group decision making. These three perspectives are detailed below. Rational perspectives of decision making The classical model of decision making is a rational perspective approach in which managers are rational as well as logical and therefore they make decisions according to the best interest of the organizations managers are concerned in. According to the classical model of decision making, decision makers have complete information about the situation and possible alternatives, they can eliminate uncertainty and more specifically they evaluate all aspects of the decision situations both logically and rationally (Griffin, 2011, p. 101). Behavioral Perspectives of Decision making Behavioral aspect of decision making illustrates that decisions made by managers are often influenced by their behavioral aspects such as personal or professional values, beliefs, skills, habits and so on. Decisions are turned out to be correct even when they are made with little regard to the logic and rational thinking. Administrative model As Griffin (2011, p. 106) noted, administrative model of decision making can be considered as part of behavioral aspects of decision making. Administrative model of the decision making model states that decision makers use incomplete or imperfect information, they are constrained by bounded rationality and they tend to ‘satisfice’ while making decisions. Bounded reality suggests that managers or people who take decision are limited by their values and unconscious reflexes, skills, and habits. They use limited knowledge and incomplete information for decision making process. Another important part of the administrative model is satisficing whereby managers tend to search for alternative only until they identify an alternative that meets minimum standard or extent of the sufficiency (Griffin, 2011, p. 107). Jones (2004, 370) meant this model of decision making by ‘The Carnegie’ model. According to him, the Carnegie model recognizes the effects of ‘satisficing’, bounded rationality and organizational coalitions. Intuition and Escalation of Commitment With intuition, Griffin (2011, p. 108) meant an innate belief of people about something without conscious consideration. In making decisions, manager’s thought is often influenced by their feeling about something as ‘right’. These sorts of feelings are not arbitrary, but these are based on their experiences they had from many years of work. Similarly, escalation of commitment is another behavioral process that influence decision making. Escalation commitment refers to the commitment of managers who make decisions and then become so committed to the course of action suggested by those decisions, despite the fact that decision may still appear to be wrong. Group Decision Making Perspectives In group decision making, the members in a group interact and collaborate each others to reach a collective decision. As group decision making a single individual accountable for any bad or ineffective decision, it generates a diffusion of responsibility and accountability among the group members. Since more members of the group collectively participate in the decision making process, it provides more complete information and knowledge (Lunenburg and Ornstein, 2007, p. 169). Various Techniques of Group Decision making 1- Brainstorming Brainstorming, which was introduced by Alex Osborn some fifty years ago (Lunenburg and Ornstein, 2007, p. 169) is one of the most effective group decision making in which alternatives are creatively encouraged and criticisms for solving a problem are withheld. In this method, the group leader starts with his statement about the main problem in a way that all members can easily understand and freely think about alternatives as they can suggest for solving the issue (Robbins and Judge, 2011, p. 299). Brainstorming method for group decision making is found to be very effective since it encourages freewheeling, maximum ideas from other members and piggybacking by allowing all group members for combining and improving the ideas that are shared by others (Lunenburg and Ornstein, 2007, p. 170). 2- Nominal Group Technique: Nominal group technique is another method for group decision making in which interpersonal communication is highly restricted. This method encourages bringing of different ideas from members of the group, but unlike brainstorming, it is concerned with generation as well as evaluation of these ideas. Nominal group technique allows a specific time for people to generate ideas for solving the problem. The problems to be solved will be posted in a flip chart in the room and the leader for decision making then facilitates round robin recording of ideas by walking around the room to record them on the flip chart (Lunenburg and Ornstein, 2007, p. 171) 3- Electronic meeting and Delphi method: Electronic meeting and Delphi methods are recent techniques for group decision making with the help of computer technology and by arranging face-to-face communication facilities. Delphi method is not direct face-to-face interaction, but instead members’ ideas and other inputs will be solicited through emails. Members are allowed to put their responses in to their computers through electronic or digitalized systems. Electronic method for group decision making allows people to be very honest without penalty (Robbins and Judge, 2011, p. 300). Steps in decision making process Decision making process, no matter whether it is personal, managerial or organizational, comprises of various steps such as identifying the problem, generating and finding alternatives to solve the problem and finally selecting an appropriate alternative among them. Bateman and Snell (2003, p. 69) identified six stages for decision making, they are: 1) identifying and diagnosing the problem, 2) generating alternative solutions, 3) evaluating alternatives, 4) making the choice among them 5) implementing the decision and 6) evaluating the decision. This six-step decision making process is illustrated in the depiction above. Initially, the manager or the decision maker realizes that there a problem exists and that must be solved. A manager typically realizes that there is a problem when he finds some discrepancies between the current state and the desired state of the organization. In second stage, the manager or the decision maker may generate newer ideas for solving the problem or make use of ready-made solutions that have already been tried or made useful before. For this purpose, the manager may seek help of others, communicate with others about different options and use various quantitative and qualitative techniques for finding alternatives. Once the manager identified several alternatives, it is very important to evaluate all these in terms of their appropriateness, ability to solve the problem, dependency and reliability etc and then the manager should select the most appropriate and right alternative. Once a specific alternative has been chosen, it is the fifth stage wherein the manager implements the decision. In the final stage, he may evaluate the decision in regard to whether it is correct or not and how successfully this could solve the problem. Personal Reflection on Decision Making in Telstra Telstra is Australia’s leading telecommunication and information service company that has emerged to be a multi-billion company by connecting million of people every day. When I have been working as an assistant to the Customer Service department of Telstra, I have been involved in a group decision making process. This decision making process happened in an important staff-meeting of Consumer wherein I also have got quite significant participation. In this staff-meeting, the CEO of Telstra initially portrayed the main issue that the company faced. As he elaborated, Telstra’s fixed line charges have been unchanged for around nine years, but the company has continually invested heavily on various technologies. To be very specific about company’s problem, Telstra is still planning to increase its total technology base and capacity by 50 percent for 2012 and 2013, but the core of the problem was its heavy investment. The CEO explained the main problem of company’s heavy burden of extensive investment and he put forward suggestions of various alternatives such as financing, retained earnings from shareholders, price increase etc. This meeting and the group decision making process happened in this meeting gave me better experiences of how successfully a decision can be brought from ideas and discussions of many members to a group. From this meeting and Group-Decision making, I realized that decision making is a systematic and scientific approach to solving a problem by identifying several alternatives and finally selecting one to sole the issue. As Gomez-Mejia and Balkin (2002, p. 208) detailed, decision making involves both identifying the problem and resolving the problem by implementing a process or procedure to make things run smoothly. Brainstorming in Telstra’s group decision making The group decision making that I involved in was brainstorming. CEO and the superior management team have not only explained the problem and financial difficulty of Telstra, but also encouraged us to openly talk about various options or alternatives to solve the problem. The core of the problem was financing. Telstra needs to invest heavily on 4G and upcoming technology for furthering its networking services to its customers. One of the main suggestions was that customers are the end users who benefit any technology advance the company brings to them and therefore they should be charged for that. This argument was rational and logical as well. But, various executives and consumer service officials talked about the likely concerns it may cause to Telstra’s existing customers. They put forth suggestions such as financing from bank, financing by retained profits from shareholders and so on. Finally, it was decided to increase access fee for half of Telstra’s Home-Line plans. It was also decided that the price of local class, since they remained unchanged for nine years, will be changed for three plans- complete, Plus and Advanced with an increase of 2 cents per call (exchange.telstra.com.au, 2012). The group-decision making process that I involved in Telstra was brainstorming for four reasons. Brainstorming encourages speak freely, discourages criticizing, encouraging as many ideas as possible and building on ideas of others. The CEO and senior executives of Telstra in the meeting encouraged members to speak freely about alternatives to solve the issue. No ideas suggested by others were criticized as well. Brainstorming method encourages maximum ideas since quantity breeds quality. Moreover, members in the meeting were encouraged to piggyback as idea suggested one member has been improved by the talk of others (McShane and Von Glinow, 2004, p. 310). Conclusion Decision making is a process of deciding what specific action to be considered from a set of two or more alternatives to solve a particular problem. When it comes to managerial decision making, it can either be rational or behavioral or group decision making. Most managerial or organizational decision making is group decision making as it eliminates personal risks and responsibilities and diffuses responsibility among a group of members. All these types of decision making processes go through some six-stages such as identifying the problem, finding alternatives, selecting one among them, implementing the decision and evaluating it. This report has presented brief literature about decision making perspectives and techniques and applied this to the personal reflection about my own experience in decision making when I worked in Telstra. My personal experience was brainstorming in Telstra as its senior managers initially explained the problem and encouraged all the members of the meeting to suggest possible ideas to solve the problem. The main problem Telstra faced was heavy investment of the company on technology and meeting the expenses for that and the final decision to solve this issue was increasing the charge for its Home-Line connections. References Adair, J, 2010, Decision Making and Problem Solving Strategies, Second edition, Kogan Page Publishers Ahmad, A, Hasnain, N and Venkatesan, M, 2012, Decision Making in Relation to Personality Types and Cognitive Styles of Business Students, IUP, EBSCO database Al-Tarawneh, H.A, 2012, The Main Factors Beyond Decision Making, Journal of Management Research, Macrothink Institute, EBSCO database Bateman, T.S, and Snell, S.A, 2003, Management, The new competitive landscape, Sixth edition, The McGraw Hill Companies, Bhushan, N and Rai, K, 2004, Strategic Decision Making: Applying the Analytic Hierarchy Process, Springer Exchange.telstra.com.au, 2012, Telstra announces price changes, Retrieved from http://exchange.telstra.com.au/?p=21163 Gomez-Mejia, L. R and Balkin, D.B, 2002, Management, The McGraw Hill Companies Griffin, R.W, 2011, Fundamentals of Management, Sixth edition, Cengage Learning Jones, G.R, 2004, Organizational Theory, Design, and Change: Text and Cases, Fourth Edition, Prentice-Hall, Pearson Education Company Lunenburg, F.C and Ornstein, A.C, 2007, Educational Administration: Concepts and Practices, Volume 13, Fifth edition, Cengage Learning McGrew, A.G, Wilson, M. J and Wilson, M.J, 1982, Decision Making: Approaches and Analysis: a Reader, Manchester University Press ND McShane, S.L and Von Glinow, M.A, 2004, Organizational Behavior, Third edition, McGraw Hill Companies Robbins, S.P and Judge, T.A, 2011, Organizational Behavior, Fourteenth Edition, Prentice Hall, Pearson Education, Inc Vermeulen, P. A.M and Curseu, P.L, 2008, Entrepreneurial Strategic Decision-Making: A Cognitive Perspective, Edward Elgar Publishing, Read More