Application of Decision Making - Coursework Example

Application of Decision Making Tools to Mortgage Industry 14th September Introduction Decision making is always a critical process in every aspect of life. Over the years, different people have come up with decision making models which are aimed at enhancing the way people think and end up making rational decisions. Making rational decisions is not a spontaneous process, it involves thorough considerations and evaluating all the factors that are involved before embarking in making of the grand decision. The seriousness that is involved in decision making comes into practicality when the outcome affects so many organs e.g. in a business that one cannot gamble with the process and maybe end up making irrational decisions which are not based on research (Chen,-Tung, 2000). In making critical decisions, the people who are in positions of leadership often run into conclusions without inquiring well from professionals who can avert the damage that can be caused by such an occurrence. A good example is the doomed merger between AOL and Time Warner in the year 2001. The merger happened despite the advice of the subordinates on Gerald Levin who was at the time the Chief Executive Officer at Time Warner Inc. Levin who was obsessed with leaving a legacy at Time Warner Inc. decided to go ahead and authorize the merger despite the warnings. This is a good example of the consequences that can follow the making of irrational decisions. In this work, we shall look at the decision making models that have been developed to help in making the best decisions especially in our field. This will be addressed in the context of the mortgage industry which is our section of interest. By first comparing them we shall be able to figure out the best and discuss it. Tools and Decision Making Models There are a number of decision making models that can be used in the mortgage and loan financing industry. First it is important to understand this field so as to see how the idea of using decision models and techniques can be implemented. First, the mortgage loans are availed to the people who want to try their hand in real estate so they can be able to purchase the property they want. In the legal mechanism that need to be followed to validate this process, the property stands as the security in case the borrower is unable to pay back the loan (Gaffney, 2014). This is a business that has been so successful in the recent past and thriving in it requires a bit of critical decision making. The amount of cash that is required to establish it means that there is no space left for gambling and every step made counts. The Problem Company A has wants to form a merger with Company B. Both companies are offering services in offering mortgage loans. However, the Chief Executive Officers of the two companies are personal enemies. The CEO of company A is ready to brush off his personal enmity with the CEO of company B for the sake of the company. However, the CEO of company B rejects the offer. He does not heed the advice offered to him about the company. At the moment his company is already making losses and so the merger would be so important to help it recover and maintain its performance. Seeing there is no fruits bound to yield, company A goes ahead and forms a merger with company C (still a mortgage one). This merger becomes so successful and eventually offers such a stiff competition to company A that is forced to close its business. The Decision Making Process Before making any decision, especially a decision that will influence many people, it is always advisable to consider the ideas of professionals and other people who are experienced (Argyris, 2000). In our case above the CEO of company B does not heed that hence his company later fails. There are a number of stages involved in decision making. The first one is to observe, always observe the situation and evaluate the factors that are involved. The second one is to orient, this will involve being exposed to the real situation and evaluating the ideas given by other people. It does not hurt to accept the ideas of other people, after all in the long run the CEO will still have the final say. According to Jones (1991) it is so important to have other peoples’ thought and improve on your own (p.2). The third step is to make the decision. The decision should be rational and based on well researched concepts. Avoid emotional thinking and personalizing matters that involve the public (Cohan. p. 66). This is the main reason company B in our study fails. After making the decision, the step that follows is to act. Decision Making Models There are various decision making models that have been projected and which can be useful in a similar scenario. The models revolve around the six step decision making model which will be discussed in this section. This involves six steps which are followed concisely to end up making a well informed and rational decision (Richarme, 2004). The first step in this model involves defining the problem and also projecting the outcome that is desired or expected. In this step, one has to overcome the interpersonal barriers and address the problem without favor or bias. This will enhance the decision making process and avoid cases of emotional thinking and reasoning (Gerald, Nicola, Maule, Glaister, and Pearman, 1999). The second step involves doing research and analyzing the options that are available. After this is done successfully remember to compare these alternatives. The comparison will also involve a detailed analysis of the benefits of each option and the consequences involved. This is the only way one can be able to establish the benefits and the limitations of each of the alternatives (Herrera, Herrera-Viedma, and Verdegay, 1996). After that, the fourth step is making a choice. Accept the advice given as the people involved may be having unlimited information that can help in the business unlimitedly. Make the most worth decision. The next step involves designing the action plan that is aimed at solving the problem that was there. Considering our case above, following the steps would have addressed the problem of the dwindling sales and avoid its collapse by forming a merger with company A. The last step is evaluation of the results (Trevino, 1986). The epitome of any action is seeing the results. If the process was successful the results are positive. If otherwise, it is advisable to try another alternative that would give better results. Other decision making models include the Vroom-Jago and the nine-step decision making models. Conclusion As discussed in the earlier paragraphs, decision making is a major factor in good management. The process should therefore be treated as supreme as it is. Always consult well and follow the steps that are required to avoid making decisions that will later haunt the company (Deng-Feng, 2004). CEO’s have been found to be arrogant and in most cases make decisions without considering the ideas of other stakeholders in the enterprise. This should be discouraged since when disaster strikes, all of them have to play their part in addressing it. References Argyris, C. (2000). Interpersonal Barriers to Decision Making. Harvard Business Review. Cohan, P. (2007). When the Blind Lead. Business Strategy Review. London: Blackwell Publishing Limited. Chen,-Tung, C. (2000). Extensions of the TOPSIS for Group Decision-Making under Fuzzy Environment. Available at. < www.sciencedirect.com/science/article/pii/S0165011497003771> Deng-Feng, L. (2004). Multi-attribute Decision Making Models and Methods Using Intuitionistic Fuzzy Tests. London: Elsevier Inc. Gerald, P. H., Nicola, J. B., Maule, A. J., Glaister, K. W. and Pearman, A. D. (1999). Breaking the Frame: An Analysis of Strategic Cognition and Decision Making under Uncertainty. Strategic Management Journal. (20). P. 977-985. Gaffney, J. (January, 2014). The Five Biggest Changes Coming to the Mortgage Industry. Is working in the Mortgage Business even a good idea these days? Available at. < http://www.housingwire.com/articles/28534-the-5-biggest-changes-coming-to-the-mortgage-industry> Herrera, F., Herrera-Viedma, E. and Verdegay, J. L. (1996). A Model of Consensus in Group Decision Making Under Linguistic Assessments. Fuzzy Sets and Systems, 78(1). Jones, M. T. (1991). Ethical Decision Making by Individuals in Organizations: An Issue- Contingent. Journal of Management Education. 16(2). P. 1-6. Richarme, M. (2004). Consumer Decision-Making Models, Strategies, and Theories, Oh My! Retrieved from. < http://www.decisionanalyst.com/publ_art/decisionmaking.dai> Trevino, L. K. (1986). Ethical Decision Making in Organizations: A Person-situation Interactionist Model. Journal of Management. 11(3), p. 601-617. Read More