Application of Decision-Making Process - Essay Example

Decision Making and Section # of This assignment is about the application of Decision Making process to the purchasing of new equipment, and identifying the sort of decision that would be undertaken for such a decision. Introduction Decision making is an essentiality of not just business but our routine lives as well. From dawn to dusk and beyond, every day is filled of decisions made by individuals at different levels, for varying levels of risks and other factors that influence the decisions or are an outcome of the same (Daniels 2006). Decisions made can be differentiated under three grounds, i.e. three specific conditions i.e. under certainty, uncertainty and risk conditions. Decisions made under certainty are those in which the probability of outcome is known. In the situation of risk, there is a potential upside of losing, while in uncertainty conditions; there is unknown probability of the outcomes associated with an event. The routine decision making can be sub divided into different forms based on several variables that differentiate them; however, the two broad categories of decision making are programmed decisions and non-programmed decisions (O Brien, 1999). A programmed decision is, simply put, a decision that has a fine structure and occurs rather frequently, with less exceptions. Such decisions are relatively easier to make as they follow a pretty standardized procedure; a simple example of the same can be answering a customer query or solving a customer query such as password retrieval. A non-programmed decision is exact complement of the former; non-programmed decisions are more about exceptional handling rather than routine work out, for such decisions, there is less structure of any formal procedures that would resolve the issue. Accordingly, the frequency of occurrence is lesser. Purchase of fixed asset, based on frequency of occurrence can be a non-programmed procedure but since the process of purchase is well defined, it does not qualify for the same. The purchase of a house or a television would be a rather non-programmed decision. Steps in Rational Decision Making Process In this section, the steps for rational decision making are applied to the given case. The case is the need for replacement of the photocopy machine, and the decision making process is to be applied for the purchase of this new equipment (Noorul Haq, 2007). For the decision making process to be successful, it should go by a procedure so that the defined procedure can undertake the different variables needed for an appropriate decision making. Following are the simple steps that are a part of the rational decision making process with brief elaboration (Davidson, 2006), alongside the three steps, their application for the given case is also briefed: STEP I: Recognizing and defining the decision situation: It is essential for managers to recognize and define the need for the decision to be taken. There are certain underlying variables that define the need for the decision; these variables are indicators for the need of a decision. The decision situation has arisen; the photocopy machine needs to be replaced and a new equipment needs to be purchased. The need has arisen mainly due to the excess usage of the equipment in routine business operations. STEP II: Identifying alternatives: Once the need for a decision is identified, alternate decisions available should be identified. Pertinent to this case, the alternatives available are the different models of the machine (that of course have varying functionalities) and the list of pre-selected vendors who sell these machines. Another form of alternative evaluation could have been evaluation of either purchase, rent or not buy at all. However, with the requirements that it caters to, it has become essentially important to buy one as it has a lot of usage in routine operations. Going to a near by shop could have been another way out, which is ruled out due to potential lose out of confidential information. STEP III: Evaluating alternatives: These alternates need to be evaluated to so as to identify which suites the situation the best. The most commonly used mechanism for alternative evaluation is the cost-to-benefit analysis or the financial tools such as NPV, IRR, and so on (Davis, 2003). The evaluation of the alternatives is dependent on certain criteria; these are warranty, pricing, vendor credibility, value added services, and additional functionality. STEP IV: Selecting the best alternative: Once the alternatives are evaluated, it is essential to select the most suitable one. It is noticeable that the most suitable does not necessarily has to be the best one, rather has to be most effective in the given set of circumstances (Gehani, 2001). Consequently, it is not possible to define a rule of thumb, as the most effective decision is dependent on the given set of circumstances. While selection, the evaluation criteria set above should be kept into consideration, however, the major stress should be to select the alternative that serves the prime purpose of the machine, with least cost, best warranty deal, with a reliable vendor and appropriate after sales services. It is always a better practice to formulate a grid or matrix and place appropriate weight for each alternative and then sum up the weights. The deal with the highest weight should be awarded the deal contract. Subsequently, the best alternative is selected. STEP V: Implementing the chosen alternative: The fifth step is to implement the chosen alternative. Once the best alternative is chosen, it should be purchased and implemented in the organization. STEP VI: Following up and evaluating the results: Finally, the most essential step of all i.e. to follow up he implementation and constant checks and balances through evaluation of the outcome of such implementation. Finally, it all melts down to the evaluation and follow up of the deal. This follow up and evaluation would be better off when the organization requires some after sales services from the vendor or some exercising of warranty. Thus, following the rational decision making process, a photocopy machine is purchased by the organization. Is the decision programmed No. As viewed, the procedure for purchase is not quite structured and over a period of time, the requirements or evaluation criteria would change. Additionally, the vendor list would also vary, and also the decision made is not a frequent one. Subsequently, the decision is a non-programmed decision (Applegate, 2001). Conclusion Life is all about decision making, particularly the life in an organization where managers make all decisions from the start of their job to the end and beyond. It is essentiality for any manager to set up a rational decision making criteria and follow the steps defined in the same (Brauers 2007). Additionally, a rational decision making model, as defined here is also quite helpful in majority of the circumstances in which decisions are to be made; the need, however, remains to understand and apply this model to varying degree and nature of work a person does on a routine basis. Bibliography Books: Davidson et al (2006) Management: Core Concepts and Skills. Milton, Qld: John Wiley & Sons. James A. O'Brien (1999) Management Information Systems: Managing Information technology in the Inter-networked Enterprise, 4th Edition Lynda M. Applegate, Robert D. Austin, F. Warren McFarlan. (2001) Corporate Information Strategy and Management. McGraw-Hill Irwin. Mark M. Davis, Nicholas J. Aquilano, Richard B. Chase. (2003) Fundamentals of Operations Management. McGraw-Hill Irwin. R. Ray Gehani. (2001) Management of Technology and Operations. John Wiley & Sons, Inc. Journals: Vicki Smith-Daniels (2006) Decision Sciences. A. Noorul Haq, G. Kannan (2007) A hybrid normalized multi criteria decision making for the vendor selection in a supply chain model. International Journal of Management and Decision Making (IJMDM) Willem Karel Brauers (2007) What is meant by normalisation in decision making International Journal of Management and Decision Making (IJMDM) Read More