Improving Decision Making: Telco Company - Example

Decision Making Institution Date The decision Strive Masiyiwa is the founder of a successful Telco company named Econet Africa. Strive has a long entrepreneurial history and has made many ethicaldecisions as his multinational telco company rolled out its network in the African continent. In a recent story on his popular Facebook page, he describes how he came onto a collision course with a corrupt African dictator.  Several years ago, Masiyiwa was involved in an operation to roll out the Econet network in the Western African republic of Nigeria. According to Masiyiwa(2015), one of the most critical infrastructure in setting up a cell phone network is a Switch Centre. A switch Centre is a large switchboard that handles incoming and outgoing calls for the network. A switch Centre contains expensive and sensitive equipment that needs high security. A switch Centre is thus housed in highly secure buildings that usually costs millions of dollars to acquire. Econet needed such a building to house their Nigerian switch Centre.  Strive and econet were also under a lot of pressure to acquire the building for the call centre immediately. Econet had paid the Nigerian government $285 million to acquire the license but one of the preconditions was that Econet would set up their operations immediately. Econet were lucky to find a building that suited their needs. The building that was available was the Liberian embassy building in Lagos. Econet moved to acquire the building but Masiyiwa (2015) decided not to approve the transaction as the money for the sale was being transferred to the Personal Swiss account number of Charles Taylor, the Liberian president at the time. Masiyiwa (2015) argued that his conscience could not let him transfer money for the sale of a public asset to a private account.  Analysis Masiyiwa (2015) as the CEO of econet had to make a a rational decision about acquiring the building being offered by the Liberian government. However, the decision could not be rational as there were a number of limitations to rational decision making in the situation. Rational decision making is almost impossible in real life as decision making is always constrained. Some of the limitations that led to the development of the bounded rationality theory of decision making include lack of enough information, time constraints and the limited decision making skills of the subject decision maker.  According to Thaler and Sunstein (2008), rational decision making involves use of analytics, facts and a step-by-step process to arrive at a decision. However, as seen in our decision scenario rational decisions run into a number of difficulties.  Masiyiwa (2015) used bounded rationality as he was aware it would be difficult to make a rational decision in the situation. One of the biggest constraints facing Masiyiw was the lack of time to work out a rational decision on whether it was a good idea to buy the Liberian embassy building. Masiyiwa (2015) says that they were working within a six month deadline. This deadline places Masiyiwa (2015) under intense pressure to make decisions about the purchase of the building to host Econet's switch centre. If Econet was unable to roll out its network within 6 months it would lose its license to operate in Nigeria which cost the telco $254 million. Masiyiwa (2015) is confronted by the immediate need to find a building for Econet's operations in Nigeria. He also has to ensure the purchase is ethical and conscionable.  The rationality of Masiyiwa’s decision is also bound by the fact that he has limited information about the decision making situation. According to Thaler and Sunstein (2008), only a Swiss bank account number was presented for the transfer of the money for the purchase. However, details about the owner of the Swiss account are not available. According toThaler and Sunstein (2008), organizational decision making is characterized by lack of enough information. Masiyiwa was not provided with information as regard the ownership of the account he was supposed to transfer money to. The skills and experience of a decision maker are also constraints on the rational decision making in this situation.  According to Thaler and Sunstein (2008), bounded rationality is present where decision making involves:  1. selecting the first alternative that is satisfactory to the decision maker.  2. Recognizing that the decision maker’s conception of the world is simple.  3. Making decisions without considering all the alternatives.  4. Use of rules of the thumb or heuristics in the decision making process.  One of the conditions of a decision whose rationality is bound is that is has to satisfie. It must be satisfactory and still suffice. In this case, Masiyiwa (2015) and Econet do not spend time and effort in finding alternatives solutions. However. Masiyiwa (2015) doesn’t simply agree to the first although alternative in the scenario. It would have been easy for Masiyiwa to purchase the building from the Liberian government immediately. Instead, Masiyiwa questions the legality of transferring funds raised by sale of government assets to individual accounts.  Bounded rationality decision making is also characterized by a simple conception of Tue world. The simple conception allows decision makers to use the least number of steps to arrive at a decision. In this case, Masiyiwa's concept of the world judges things as wrong or right. Since he thinks it’d wrong to send public funds to private accounts he cancels the deal for the purchase of the house. According to Thaler and Sunstein (2008), this simplicity of rational decisions making enables managers to make decisions easily with very little time needed for the decision making process. The need to save time in bounded rationality means only a few of the alternatives can be determined. There is no need to explore all the alternatives in order to find a solution,  Heuristics or rules of the thumb are the fourth focus of bounded rationality. Rules of the thumb enable decisions to be made with the least mental effort expended. Managers employ two types of heuristic biases; availability heuristics and representative heuristics. In this case, Masiyiwaused available heuristic bias as the easy answer to the uncertainty is to cancel the purchase of the property.  Improving Decision Making Elimination of all forms of bias is the main aim of strategies to improve decision making. According to Thaler and Sunstein (2008), these four strategies can help to eliminate biases in decision making: 1. Warning decision makers of possibility of bias in decision making; 2. describing the direction of bias; giving feedback; and training and coaching to improve decision making. With these strategies better and less biased decisions can be made. Stanovich and West (2000) suggest that there are two systems used for decision making. Recognizing and distinguishing the two systems is a basis for improved decision making and allows for strategies for decision making to be discovered. System one is a reference to intuitive decision making which is automatic, fast, implicit, effortless, and emotional. System 2 is a reference to a much slower decision making process which involves effort, consciousness and is logical and explicit. Initiative decision making faces such challenges as lack of critical information to make decisions, failure to notice available information, time and cost constraints and the ability of the human brain to only retain small amounts of information in their usable memories. Busy people are more like to rely on intuitive decision making as they face time constraints in their decision making processes. The frantic pace of contemporary businesses makes it easier for management to rely on system 1 thinking. Consciously changing over to system 1 thinking can greatly improve the decision making process and result in less error prone decisions. One of the strategies to improve intuitive decision making can result in better outcomes in decision making. Sunstein and Thaler (2003) argue that biased decision making based on automatic cognitive responses can be improved greatly. They argue that changing the environment of the decision maker to maximize odds of an optimal decision being made is key to improving biased decision making. For, example, decision makers can set a default option where they is an inaction bias. For instance, if Econet’s default option was to reject corrupt deals, Masiyiwa would have made the decision to cancel the deal for the sale of the building. Choice architects are supposed to ensure the default option is also in the best interest of the organization person or decision maker (Benartzi and Thaler, 2007). A good example is where saving rates went when 401k plans were made the default option Organizations should also engage In conscious effort to remove bias from decision making (Nosek, Greenwald, &Banaji, 2007). Making people aware of the existence of various biases is important in efforts to eliminate biases from decision making (Lowery, Hardin, & Sinclair, 2001). However, Blair(2002) notes that changing the environment of decision is key in overcoming biases to intuative decision making. According to Thaler and Sunstein (2008) , biases such as racial, sexual and ethnic can be eliminated. Making people acknowledge their own biases is a first step in getting them to eliminate their unconscious bias in decision making. References Benartzi, S., &Thaler, R. H. (2007). Heuristics and biases in retirement savings behavior. Journal of Economic Perspectives, 21(3), 81-104. Blair, I. V. (2002). The malleability of automatic stereotypes and prejudice. Personality & Social Psychology Review, 6(3), 242-261. Lowery, B. S., Hardin, C. D., & Sinclair, S. (2001). Social influence effects on automatic racial prejudice. Journal of Personality and Social Psychology, 81(5), 842-855. Masiyiwa, S (2015). Strive Masiyiwa. Retrieved from www.econetwireless.com/strive_masiyiwa.php Nosek, B. A., Greenwald, A. G., &Banaji, M. R. (2007). The Implicit Association Test at age 7: A methodological and conceptual review. In J. A. Bargh (Ed.), Social Psychology and the Unconscious: The Automaticity of Higher Mental Processes, New York: Psychology Press. Stanovich, K. E., & West, R. F. (2000). Individual differences in reasoning: Implications for the rationality debate. Behavioral & Brain Sciences, 23, 645-665. Thaler, R. H., &Sunstein, C. R. (2008). Nudge. New Haven: Yale University Press. Read More