The Difference between Uncertainty and Risk - Essay Example

?What is the difference between uncertainty and risk?  What role does uncertainly and risk play in strategic planning and organizational decision-making? How does decision-making change from an individual to a group setting? Whereas risk and uncertainty are often utilized side-by-side and given the same connotation, the fact of the matter is that these two terms represent distinctly different, yet at the same time somewhat similar, externalities. For instance, risk can be defined as not knowing what is going to happen next but having a general understanding with regards to what likely outcomes might be from such a risk. By the same token uncertainty has to do with the fact of not knowing what is going to happen next and also having no idea with regards to the possible outcomes of this uncertainty might be. In order for effective strategic planning to take place, both risk and uncertainty must be categorized and classified. Merely because it is not known what might come of a certain situation, decision, or action, this does not provide the leader, or leadership team with an effective excuse for not at least considering some of the likely externalities that might come out of a given situation (Kim 65). For instance, if a particular individual within leadership, or 18 of individuals within leadership, are distinctly aware of a potential risk that they face, they would be patently foolish to ignore the risk and not focus upon the means by which they can prepare for the eventuality that all of the possible outcomes may portend. Some of these might be negative, some of these might be positive; however, regardless of whether they are positive or negative, it is necessary for the individuals within leadership to at least planned for them so that when they occur the maximum amount of utility can be gained from whatever eventuality presents itself. The decision-making process cannot and should not be understood as something that is undifferentiated from the individual to the group. What is meant by this is that an individual making a decision necessarily engages in the process in a far different way than does the group seeking to make a decision. All too often, leaders within a particular management team are of the opinion that an individual decision must be made in far too many circumstances (Klinke & Ortwin 275). However, the fact of the matter is that employees/stakeholders, are not only their two perform useful work; they are also there to leverage upon their own decision-making and encourage their participation within the decision-making process. As such, the individual decision-maker would rely upon the accident information and personal experience that he or she might have with regards to solving a particular situation. Leadership is not something that can be effectively performed utilizing either a firm understanding of one or the other aspect of risk or uncertainty. Rather, it is necessary for a true leader to be well rounded in the strategic planning for both of these factors. By allowing for a well balanced approach that considers the means through which both risk and uncertainty plays into the expectations for success and threats of failure that integrate with the future of the firm. Whereas it is tempting for an individual to rely upon a given focus to a greater or lesser degree, the more appropriate response is to allow for strategic planning to take place in a well nuanced manner; fully mindful and cognizant of the degrees to which strategy and planning are part and parcel of the role that any leader and/or effective manager must engage. By comparison, a leader within a group would have the possibility and likelihood of drawing upon the inputs of the stakeholders as a means of making a well-informed and dynamic decision. Neither approach is correct or effective in each and every situation; however, from an analysis of the existing documentation and a integration with the information that is thus far been presented course, it is the understanding of this particular student that the group decision-making process oftentimes helps to alert the decision-maker with regards to some likely pitfalls that they might experience that they might not be cognizant of if they were to indeed make a decision upon their own knowledge alone. The group setting allows for a tacit level of democractic choice. This is not to say that as soon as an individual leader seeks to engage a group they must abandon the authority that it tacitly exhibited within their role; rather, it denotes the fact that leadership of a group is not a one way process and must be mindful of the opinions, approach, and ways of performing key tasks that other stakeholders within the process might necessarily have. What separates a good leader from a mere manager is the fact that the good leader is forever cognizant of the fact that they will not always have the best approach for a given set of tasks and must rely upon the approach of their stakeholders from time to time as a means of injecting fresh ideas into the process. Describe the "systems" approach to management.  Is systems theory overly theoretical? How "systematic" are managers in applying systems concepts to decision-making? Before seeking to answer whether or not the systems approach to management is overly theoretical, it is necessary to understand what specifically systems theory of management advocates. Whereas there are many schools of management theory and many different individuals claim to promote an all inclusive idea that is considerate of all of the facts of management, it must be understood that the systems theory of management was perhaps one of the very first there is a management forward. As such, it is only fair to assume that it necessarily has had nearly 100 years of time in order for individuals to point out its weaknesses and shortcomings. With that being said, the systems approach views management as an approach to management that considers an organized or complex whole being made by component parts. In such a way, managers that utilize this particular approach to management would likely view their employees and departments/divisions/individual tasks as systems and subsystems of a greater whole. This is an effective means of understanding priority, efficiency, task a delineation, and workplace expectation. These represent but a few of the strengths that the systems theory represents. Yet, by the same token, the systems theory is ineffective in helping to explain more abstract approaches to management and/or the way in which a particular systematic approach can be applied universally. In seeking to define and delineate the way in which management should take place within an organization, the systems approach takes, what this student would argue, is a rather arrogant approach; choosing to espouse the idea that a one size fits all is somehow the best approach that management within a firm or business entity can and should engage. He overall ineffectiveness is oftentimes exhibited within firms that share a rigid historical culture that has always performed tasks within a given way as a result of a powerful example and/or effective leader that existed at some point in the past (Zhao 15). Even though such an approach was most effective within a particular era, it does not guarantee a degree of success within the current time. Even a cursory level of examination reveals the fact that the systems theory of management places too much of a focus upon the social system of management, dynamic management, multilevel management, and a litany of other approaches; all while ignoring the personal and psychological influences that a particular management style might have upon a range of different individuals from different walks of life. Ignoring the personal and psychological impacts that the systems theory necessarily eschews isdone at the peril of the leader; especially in an age in which such impacts are well appreciated and known to have a powerful impact upon the way in which work is performed and the degree and extent to which profitability and utility can be coaxed from the individual stakeholders (Naor 548). In short, seeking to engage with the systems approach is not inappropriate at each and every juncture; rather, it is merely one of those aspects of management theory that is useful towards accomplishing some key goals within certain situations; however, it cannot be universally applied with any expectation of broad ranging success. Naturally, the theories that had been put forward sense, specifically the theories of the been put forward recently, detail the way in which systems management is an ineffective means of engaging the workforce of an entire industry; choosing instead to focus upon the more nuanced and sensitive approaches to the way in which different people respond to different stimuli. Within such an understanding, it is the firm belief this particular student that the systems approach, although representing many useful aspects of management theory, is ineffective in engaging the full potential of all of the individuals towards whom it might be applied. References Kim, Heeho. "Uncertainty And Risk Premium Puzzle." Journal Of Economics & Finance 37.1 (2013): 62-79. Business Source Complete. Web. 25 Sept. 2013. Klinke, Andreas, and Ortwin Renn. "Adaptive And Integrative Governance On Risk And Uncertainty." Journal Of Risk Research15.3 (2012): 273-292. Business Source Complete. Web. 25 Sept. 2013. Naor, M., E.S. Bernardes, and A. Coman. "Theory Of Constraints: Is It A Theory And A Good One?." International Journal Of Production Research 51.2 (2013): 542-554. Business Source Complete. Web. 25 Sept. 2013. Zhao, Lee. "ORGANIZATION & MANAGEMENT THEORY Conference Paper Abstracts." Academy Of Management Annual Meeting Proceedings (2010): 1-133. Business Source Complete. Web. 25 Sept. 2013. Read More