The Ideal Decision-Making Process Is Unrealistic - Coursework Example

“The ideal decision making process is unrealistic.” Introduction Decision making is necessary for gaining and maintaining a competitive advantage. A manager has to make many decisions almost every day. The ideal decision making process is assumed to be a rational process where each step follows in a logical order, taking into account every option and its future consequences. But in an increasingly complex world, the rationality involved in decision making is a myth. The task of decision-makers is becoming more challenging. The objective of this paper is to understand the decision making in business organizations, especially in Airlines industry. Analysis of business decision-making Decision-making is the process of choosing among alternative courses of action in order to attain goals and objectives. Decisions made in an organization are subject to ‘group thinking’, which might lead to failure in implementation of policies and strategies, like what happened in the Bay of Pigs invasion by the US army (Janis, I. 1972, quoted in Salaman, G. 2002, p. 9- 38). The failures can be analyzed from two perspectives, namely (Valentine, E., 1994, quoted in Salaman, G. 2002); Strategic diagnosis- It helps in deciding on which of the decisions and actions are flawed. Behavioral diagnosis- It determines why and how the flawed decisions and actions can be materialized. The behavioral diagnosis is very important as the human information processing is influenced by external factors such as beliefs and political influences. According to Millar, S. J., Hickson, D. J. and Wilson, D. C. (1996), the complexity of the modern organizations increases the importance of making key decisions. Pettigrew (1973, quoted in Salaman, G. 2002) suggests a ‘contextualist’ framework for exploring the behavioral dimension of organizational failures. Accordingly, at any point in time, the organization’s capabilities, prospects, decisions and actions are rooted in the preceding events, choices, and experiences that comprise its history and shaped its culture. The lateral relationships existing in the organization can be called ‘office politics’, where the executive is a tactician and philosopher who ‘must live by his wits, competitive instincts, understanding of social forces and ability as a leader. So the behavior perspective of organizational decision making makes it necessary to understand the Behavioral theory of the firm. Behavioral theory of the firm The behavioral theory of the firm helps to understand the actual process of making business decisions and provide detailed observations of the ways in which organizations make these decisions (Cyert and March, 1963, quoted in Salaman, G. 2002, p. 62). Cyert and March propose two major organizing devices: a set of variable concepts and a set of relational concepts. The variable concepts are organizational goals, organizational expectations, organizational choice and organizational control. There are also four major relational concepts, namely; Quasi-resolution of conflict- The coalition in an organization is a coalition of members having different personal goals. Members require some procedure for resolving conflicts, such as acceptable-level decision rules, sequential attention to goals, or both. Uncertainty avoidance- The modern decision theory is concerned with problems with decision making under risk and uncertainty. Organizations avoid uncertainty by anticipating events in distant future by using decision rules emphasizing short term reaction to short term feedback and thereby devising ways to make the environment controllable. Problemistic search- According to this theory, the search is stimulated by a problem and is directed towards finding a solution for that problem. Organizational learning- Organizations exhibit adaptive behavior over time, with respect to three different phases of the decision process: adaptation of goals, adaptation in attention rules, and adaptation in search rules. So the organizations require a decision making model that can be applicable in its uncertain environment. The question that arises now is whether the decision making process need to be rationalistic. Classical rational model A rational decision making model involves a cognitive process where each step follows in a logical order from the one before. The steps involved in this ideal decision making model are as under: Define the decision to be made Identify the important criteria for the process and the result Consider all possible solutions and their consequences Choose the best option Rationality of actions and organizational decision making The basic characteristic of organizational decision making is ‘irrationality’ (Brunsson, N., 1982, quoted in Salaman, G.2002). The reasons for irrationality are: 1. Decision maker is not clever enough to be rational 2. Irrationality is inherent in human behavior and cannot be changed completely. 3. There may be practical restrictions such as no or excess information. The ‘action’ perspective helps to understand the organizational behavior. Making a decision is only a step towards action. The various actions are as follows: Intelligence actions to improve the data on which forecasts are based, to obtain new data, and to improve the forecasting models Actions to buffer the effects of forecasting errors Actions to reduce the sensitivity of outcomes to the behavior of competitors Actions to enlarge the range of alternatives whenever the perceived alternatives involve high risk The end product of the actions taken is the decision. An understanding of this relationship between decision making and actions helps to know why decisions deviate from rationality. So irrationality provides the framework for organizational actions. The rational decision making model does not recognize the cognitive abilities of the person making the decision like memory power and imagination. It also attempts to negate the role of emotions in decision-making. Variations to rational decision making model Pure rationality model is the most rational decision-making model because it allows decision-makers to make the best decisions and achieve highest efficiency out of unlimited time, resources and knowledge in generating decisions. The deviations from rationality have resulted in the following two types of models: Incremental rational decision models- This is a less rational model because ends and means are intertwined. Goals are politically feasible and decisions are made by comparing several immediately available alternatives. Bounded rational decision models- It enables the achievement of given goals subject to subjective constraints. Airlines industry The airline industry is part of the service sector; it also possesses several characteristics similar to those of manufacturing industries including intense regulation, high entry barriers and high capital costs, with tendencies towards oligopolies. As competition in the airline business intensifies, traditional carriers pursue strategies to spur growth, trim costs, and improve profits. The airline schedules cannot be carried out as planned due to many unavoidable disturbances. Therefore airlines need to efficiently manage frequent disruptions and recover the disturbed schedules during the irregular operations. Applicability of decision making models The various decision making models used widely in Airlines industry to deal with its complex environment are as given below: 1. Anticipatory Management decision process model- The Anticipatory Management decision process model provides an understanding on what's going on outside the organization and use that understanding to make better decisions and plans. It focuses on uncovering emerging issues and gives a way to evaluate how serious those issues are and what impact they may have on the organization, so that decisions can be made in time. In 1983, the anticipatory issues management team informed the United Airlines that there is radiation from video display terminals (Ashley, W. and Morrison, J., 1997). This information was used to draft position papers, form coalitions, and write testimony. Ergonomic architects were brought in to evaluate each reservations center and accomplish the necessary work on United's time and budget. 2. Crew resource management program- Crew Resource Management is the proper use of all available resources to achieve safe and efficient operations. It will take into account the type of tasks that are to be performed, surrounding environment in which they will or may take place, and the organizational factors that may contribute to the overall scope of processes. The information gained will then be analyzed to detect elements that may lead to human errors. Once this is accomplished, this information will then be used to eliminate, or at least severely restrict these errors. The United Airlines flight 292 from Los Angeles to Chicago crashed in 1987 (Eyewitness report, 1997-2008). The number two engine disintegrated after a turbine fan blade came apart. The captain knew that it would be a non-survivable crash. The Crew Resource management model was used and there were 180 survivors, even though unfortunately 112 perished. 3. Decision support system (DSS)- DSS are a type of computer-based information system that supports the decision making. It helps in gaining and maintaining a competitive edge in leading and managing global business relationships. The best example for this model is the Continental Airlines (Anderson-Lehman et al., 2004). Continental Airlines was one of the best airlines company in US. But financial troubles started due to poor on-time performance, mishandled baggage, customer complaints, and denied boarding because of overbooking. The company used Decision support system. The real-time data warehousing and business intelligence allowed Continental to use extremely fresh data to support current decision making and business processes to affect the organization’s fate. Another model used in training the new pilots is the Recognition-Primed Decision model (Wilson, B. T., 2007). It explains how experts rapidly assess situations and make decisions in dynamic environments like that of an aircraft, and synthesizes the various decision models into a coherent whole. The decision maker gathers information from the environment in relation to the decision to be made. Each and every option is mentally rehearsed until he finds the best option. It gets at the essence of how expert pilots make decisions in the dynamic environment of flight. Conclusion The complexity of managing organizations has increased greatly. The fast changing and global environment dictates that a successful enterprise has a rich decision-making process. The decision maker has limited capacity for rational thinking, and so generally constructs and analyzes a model for a real life situation. The behavior may be rational, but the rational solution will not rational for the real life problem. There are also certain elements in the system environment in which the decision maker works, which are not under the control of the decision maker. Also, the decision-maker may have to consider situations in which several outcomes are possible for each course of action, and the probability of occurrence of the possible outcomes are not known (insufficient information). Therefore it can be said that the ideal rational decision making process is unrealistic. References 1. Salaman, G. (2002) Decision Making For Business: A Reader. Sage Publications. Bibliography 1. Cyert R M & March J G. (1963) A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice-Hall, Quoted in Salaman, G. (2002) Decision Making For Business: A Reader. Sage Publications. 2. Janis, I. (1972) A perfect failure: the Bay of Pigs. Victims of Groupthink. p.14- 49. Quoted in Salaman, G. (2002) Decision Making For Business: A Reader. Sage Publications. 3. Pettigrew, A. (1973) The politics of organizational decision making. Quoted in Salaman, G. (2002) Decision Making For Business: A Reader. Sage Publications, p. 97. 4. Brunsson, N. (1982) The irrationality of actions and action rationality. Journal of Management Studies 19(1). Quoted in Salaman, G. (2002) Decision Making For Business: A Reader. Sage Publications. 5. Valentine, E. (1994) Anatomy of a fatal business strategy. Journal of Management Studies, 31. Quoted in Salaman, G. (2002) Decision Making For Business: A Reader. Sage Publications. 6. Millar, S. J., Hickson, D. J. and Wilson, D. C. (1996) Decision making in organization. Handbook of organization studies. Sage Publications Ltd. Quoted in Salaman, G. (2002) Decision Making For Business: A Reader. Sage Publications. 7. Ashley, W. and Morrison, J. (1997) Anticipatory Management: 10 Power Tools for Achieving Excellence into the 21st Century. Action Publications. [Internet]. Available from: http://www.wfs.org [Accessed on 24 November 2008]. 8. Anderson-Lehman, R., Watson, H., Wixom, B. & Hoffer, J. (2004) CONTINENTAL AIRLINES FLIES HIGH WITH REAL-TIME BUSINESS INTELLIGENCE [Internet], MIS Quarterly Executive Vol. 3 No. 4 / December 2004 University of Minnesota, p163. Available from: [Assessed on 25 November 2008] 9. Captain Al Haynes, Eyewitness Report: United Flight 232 (1997- 2008) [Internet], November. Available from: < http://www.airdisaster.com > [Accessed on 26 November 2008] 10. Wilson, B. T. (2007) The Recognition-Primed Decision Model. Flight Cog.com [Internet]. Available from: http://www.flightcog.com > [Accessed on 25 November 2008] Read More