The Globalization Effect and the Fast Technological Advancements - Term Paper Example

The Rational Decision Making Process is Unrealistic 0 Introduction The globalization effect and the fast technological advancements in virtually all industries, have unavoidably contributed to a new way of conducting business. The rapidly changing environment and the complex dynamic marketplaces require managers to deploy flexible and adaptive strategies in order to keep up with the fast pace of the changes in account (Nooraie, 2008). Decision making has become an integral component in management’s agenda; this clearly implies that corporations and firms around the globe are continuously faced with challenges that need to be confronted or problems to be resolved. To this extend, decision making is vital as it conclusively determines the path that is going to be followed. Salaman (2002) argues that the importance of decision making is underlined by the fact that decisions eventually direct the organizational activities. Moreover, Heracleous (1994) adds that decision making, as a core task of all management levels, is critical in determining a firm’s competitiveness and thus, must be approached in the most effective way in order to avoid any harmful effects on organization. With regards to the business environment the ultimate goal of decision making is the selection of the most appropriate and effective alternative – amongst various options – that systematically and pointedly addresses to the problem(s) emerging and generates positive outcomes that favor the organizational performance (Johansson, 2006). Therefore, it is only natural to assume that the decision making process involves steps and procedures that are oriented towards achieving effective results and providing the fundamental basis for success. Nooraie (2008) suggests that the entire process needs to be viewed within the overall context of the organization mainly due to the fact that the decisions made by managers or other actors do not stand alone; in more details, decisions have a profound impact not only in terms of a particular subject being resolved, but on the organization as a whole. Papadakis et al. (1998) further comment that decision making also affects the nature of the process deployed in the future. For this very reason, the decision making procedure is more than just a simple confrontation of rising issues; rather it is associated with the organizational thinking (Salaman, 2002). 2.0 The Rational (Classical) Decision Making Theory The rational decision making theory stresses the importance of logic and the systematic approach to problem-solving. It is largely based on the economic-man theory, which suggests that the decisions are made under the rational evaluation of alternatives and the choice of the most prominent one that will maximize the potential for success (Salaman, 2002). Particularly, the rational model of decision making involves a series of steps that are to be followed under the scope of objectively and logically proceeding to actions; managers implement a sequence of procedures that eventually lead them to the optimal or best fit scenario (Johansson, 2006). The steps outlined by this theory include: identification of the problem; decision makers realize and understand the nature of the situation and the importance of the decision to be made development of criteria for the alternative courses of action; managers indicate the specifics and the nature of the alternative scenarios indication of alternative paths; this step includes the explicit statement of possible courses of action with regards to generating effective outcomes evaluation of the alternatives identified; at this point decision makers need to assess the various choices selection and implementation; this final step of the rational model involves the end decision made and the specific action deployed so as to achieve the objectives and the goals targeted (Papadakis et al., 1998; Salaman, 2002). It is clear from the steps and procedures associated with the particular decision making model, that the theory is largely based upon the notion that managers act as mere ‘objective’ viewers or participants of a given problem and that the evaluation of choices and alternatives available are not intervened by any factor other than the focus on implementing the best positive course of action towards problem-solution. Additionally, this model is based on various assumptions that relate to the perception of decision makers, the cognitive process and the neutral position of managers towards the issue in account (Salaman, 2002). Finally, it builds upon the assumption that individuals involved in the decision making process have a clear and structured knowledge of all the necessary information that enables them to draw upon constructive conclusions that enhance the effective evaluation of the alternatives offered (Heracleous, 1994). 2.1 Limitations of the Rational Decision Making Model The rational decision making theory, although dominating the literature with regards to academics’ and practitioners’ views, poses significant limitations that highlight its unrealistic approach. Salaman (2002) refers to the distortion not being encountered in the particular theory, and argues that it plays a significant role in the overall decision making process. Although attributing rationality to the procedure is attached to a thorough and logical sequence of steps followed in an attempt to conclude upon courses of action that maximize the potential for successful results, it is ‘naïve’ to consider that individual involvement is not present in the entire process (Johansson, 2008). Salaman (2002) argues that managers are acting within bounded rationality, which implies that despite the fact that the individuals themselves might perceive that they take a rather rational stance towards a specific issue, it is not realistic to assume that this eventually reflects the reality due to two fundamental reasons; time constraints and limited information existing. In other words, the rational (classical) theory suggests that decision makers gradually deploy a given strategic action on the basis of firstly identifying the situation; however, this is not possible in the real context as in most cases there is a shortage of all the necessary data that would enable a guaranteed alternative action. In addition to that, during the stage of evaluating both the criteria for constituting the feasible alternative solutions and the final choice of the managers, time pressure is a factor that leaves little room for objective confrontation of the real context. The rational decision making model is a theory that is built upon the subject of how decisions ‘ought’ to be made, and not upon the degree in which this becomes effective (Papadakis et al., 1998). It is therefore, more of a prescriptive theory than descriptive; in the sense that it does not correspond to real life implications. Empirical studies and researches conducted have shown that management is primarily faced with ill-structured situations and that uncertainty prevails in the majority of cases (Heracleous, 1994). This uncertainty refers basically to the limited knowledge of decision makers regarding the alternative choices and the partial search for solutions. Salaman (2002), likewise, explores the extend to which the organization itself, as a system of beliefs, values and thinking, eventually intervenes and mediates the decision making process. In other words, it is suggested that managers do not act independently, as they are merely a part of a larger scheme of interacting factors and structures that gradually formulate and shape the attitudes and the behaviors with regards to making decision. Thus the individual way of thinking (which could be assumed as purely rational) is eventually blended with the organizational systems thinking. Moving on to the unrealistic depiction of the actual decision making process, offered by the rational model, there should be an analysis of the politics that underline decisions. The allocation of power to decision makers can significantly impact the procedure itself as there is intervention of interests and authority to decision making (Johansson, 2008). The underlying political implications of decision making process, according to Salaman (2002) create a more complex framework within which choice is to be made; within a group of decision makers, power can direct towards the end of the final selection of the particular course of action. In more details, power delegated to individuals involved in the procedure can alter and modify the development of alternative solutions and in the end favor the decision mostly supported by them (Heracleous, 1994). 3.0 Poor Decision Making in Jetblue Airlways JetBlue Airways is a low cost airline company, member of the JetBlue Airways Corporation, that operates in the industry since 2001. The firm bases its competitive advantage on the budget tickets that it offers to customers, as a result of the overall low cost structure of the organizational strategy. Despite the fact that JetBlue appeared to be a solid and profit-making corporation, various managerial problems have severely damaged its competitive position in the market and exposed the company to great risks with regards to overall performance. The incident in Valentine’s Day, has been one of the most full grown fiascoes in the industry due to the lack of an efficient and strategic approach on the part of managers with regards to decision making process. The company, in an attempt to deliver high customer satisfaction, was directed towards avoiding to cancel flights even if the circumstances demanded so. In 2007, on February 14th there were various flights scheduled despite the fact that weather forecasts were against any implementation of flights due to heavy storms and snow-falling (De Avila, 2007). The management of JetBlue, however, assumed that the forecasts were based on exaggerating attempts to prevent any accidents that might occur. Thus, on the basis of this perception, top managers and executives decided to proceed with the flights, including one that originated from JFK, New York to Los Angeles. The result was passengers of the particular flight being ‘hostages’ in the airplane for more than 10 hours simply because the aircraft could not take off; in the end the flight was cancelled. This led to a major crisis in the organization as it consequently generated enormous customer complaints and ‘damaged’ its credibility and reliability (Smith, 2007). The decision not to cancel the flight prior to this incident proved extremely ineffective and inefficient to the entire organization. This case is an example of the fact that both power politics and individual perception interfere with the decision making process. The rational model would suggest a more logical approach to the situation/problem, however various other factors led to insufficient information knowledge, as well as individual and power involvement in the decision. 4.0 Concluding Remarks Rational decisions are fundamentally based on the first and initial step, which suggests the identification of the problem or situation to be confronted; this by its nature becomes unrealistic as it highlights the fact that full and clear indication of the issue requires a sufficient amount of information to be gained. In reality, the time constraints as well as the degree of individual involvement (with regards to individual perceptions) to the overall situation greatly limits this approach; managers are bound to make decisions in their everyday job activities and tasks, thus by virtue they cannot have access to all the necessary information that would foster and promote a rational process to be followed. The beliefs and perception of causation, according to Salaman (2002) are to a great deal credited for the limitations of the rational model as well. Managers are not ‘machines’ that can objectively calculate the pros and the cons of a certain action, and then proceed to the decision after having indicating the possible outcomes. Actual decision making is far more complex. To this extend, biases stemming either from the individual perspective or the collective organizational perspective emerge and gradually interfere with the entire procedure in management’s decisions (Heracleous, 1994). References Heracleous, L.T. (1994). Rational Decision Making: Myth or Reality?. Management Development Review. Vol. 7, No. 4, pp. 16 – 23 Johansson, B. (2008). Achieving High Commitment in and of Sourcing Decisions – A Decision Making Paradox. Journal of International Business. Vol. 35, No. 3A, pp. 313 – 322 Papadakis, V.M., Lioukas, S., and Chambers, D. (1998). Strategic Decision-making Processes: the Role of Management and Context. Strategic Management Journal, Vol. 19, pp. 115 - 147. Salaman, G. (2002). Decision Making For Business. Sage Publications Ltd. London Internet Sources De Avila, J. (2007). The JetBlue Post Mortem: What Went Wrong?. Available at Retrieved on November 16, 2008 Smith, M. (2007). JetBlues Valentiness Day Nightmare Mortifies. Available at Retrieved on November 16, 2008 Read More