Essay PreviewMore ↓
Decision making is defined as the selection of a course of action from among alternatives; it is at the core of planning. A plan cannot be said to exist unless a decision—a commitment of resources, direction, or reputation—has been made. Until that point, there are only P1anning studies and analyses. Managers sometimes see decision making: as their central job because they must constantly choose what is to be done, who Is to do it, and when, where, and occasionally even how it will be done. Decision making is, however, only a step in planning. Even when It is done quickly and with little thought or when it Influences action for only a few minutes, it Is part of planning. It is also part of everyone’s daily life. A course of action can seldom be judged alone because virtually every decision must be geared to other plans.
The Importance and Limitations of Rational Decision Making
In the discussion of the steps in planning In Chapter 4, decision making was considered a major part of planning. As a matter of fact, given an awareness of an opportunity and a goal, the decision-making process is really the core of planning. Thus, in t1is context, the process leading to making a decision might be thought of as (1) premising, (2) identifying alternatives, (3) evaluating alternatives in terms of the goal sought, and (4) choosing an alternative, that is, making a decision.
Although this chapter emphasizes the logic and techniques of choosing a course of action, the discussion will show that decision making is really one of the steps in planning.
Rationality in Decision Making
It is frequently said that effective decision making must be rational. But what is rationality? When is a person thinking or deciding rationally? People acting or deciding rationally are attempting to reach some goal that cannot be attained without action they must have a clear understanding of alternative courses by which a goal can be reached under existing circumstances and limitations. They also must have the information and the ability to analyze and evaluate alternatives in light of the goal sought. Finally, they must have a desire to come to the best solution by selecting (1w alternative that most effectively satisfies goal achievement.
People seldom achieve complete rationality, particularly in managing.’ In the first place, since no one can make decisions affecting the past, decisions must operate for the future, and the future almost invariably involves uncertainties In the second place, it is difficult to recognize all the alternatives that might be followed to reach a goal; this Is particularly true when decision making Involves doing something that has not been done before.
How to Cite this Page
"Decision Making In Business." 123HelpMe.com. 28 Jan 2020
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Introduction The decision making is the main ingredient of the business organization as every success or failure of the organization mainly depends upon the decisions made by the management of the company. The critical decision making process is very important in business as it possess the various factors that depends upon the success and vitality of the business. The decision leads the organization towards better understanding of the matters and will also help in better coordination among the clients, employees and managers within the company.... [tags: Critical thinking, Decision making]
1180 words (3.4 pages)
- Decision making plays an essential role to the success of a business in the contemporary business society. Thus, any organization or business that wishes to succeed must be careful in its decision making. For instance, Nike company is always keen with it decision making; it consults considers various factors before making a decision. For example, a business decision that has been made by the Nike organization and has resulted in the great result is the signing of Michael Jordan in 1984 (Beauchamp, Bowie, & Arnold, 2004).... [tags: Decision making, Critical thinking]
1151 words (3.3 pages)
- Communication and decision making is a big part of everyday business. Fred Luthans writes, “Both communication and decision making are dynamic, personal processes relevant to the social cognitive framework and the study of organizational behavior.” (Luthans, 2011, pg. 259) Communication and decision making are tied together. A person has to be able to interpret different types of communication in order to form a proper decision. Many companies have seen the benefit of people working in teams. They have redefined a number of jobs to be a team atmosphere to solve problems and to make decisions.... [tags: Decision making, Problem solving, Idea]
1144 words (3.3 pages)
- ... Satisficing means an organisation accepts a satisfactory rather than optimal approach to maximise the performance. In layman’s term, it means the final decision made by the coalition is just satisfying the stakeholders sitting on the board but that solution may not be the best one to optimise the performance of an organisation. Secondly, managers are concerned with immediate problem and short-run solutions or what Cyert and March (1963) termed as “problemistic search”. Problemistic search simply means the managers look around the environment to look around for a quick solution to solve the task as they don’t expect a perfect solution when it is ill-structured.... [tags: output, model, environment, business]
1399 words (4 pages)
- The field of ethics (or moral philosophy) involves systematizing, defending, and recommending concepts of right and wrong behavior (Fieser, 2009). Many of the decisions one faces in a typical day could result in a multitude of outcomes. At times it can be hard to determine whether or not the decision you are making is an ethical one. Many philosophies have been devised to illustrate the different ways of evaluating moral decisions. Normative ethics focuses on assessing right and wrong behavior. This may involve reinforcing positive habits, duties we should follow, or the consequences of our behavior (Fieser, 2009).... [tags: Business Ethics, Normative Ethics]
986 words (2.8 pages)
- Definition of Key Term The manager plays the major role in his organization decision making business system. Professor Henry Mintzberg formed the managerial role into three categories of management. The first category is interpersonal in which the roles refers to (figurehead, leader, liaison), next is informational category in which the role refers to (monitor, disseminator, spokesperson) and finally decisional category in which the role refers to (entrepreneur, disturbance handler, resource allocator, negotiator).... [tags: Management, ManaGeR, Leadership, Earth]
727 words (2.1 pages)
- Decision Making in Business “Decision making is a process of first diverging to explore the possibilities and then converging on a solution(s). The Latin root of the word decision means "to cut off from all alternatives". This is what you should do when you decide.” (Kotelnikov, 2008). In fact, the decision making process helps reduce doubt and uncertainty about alternative choices to allow individual to choose the best reasonable choice. In addition, the decision making process can make the difference between a successful and an unsuccessful organization.... [tags: Business Management HR]
1298 words (3.7 pages)
- Abstract This paper will identify my top five values and how they are used in business decision making. Examples will be given to explain the personal foundation of the values and justification as to why the corresponding values were place at their respected position on the list. Values Used in Business Decision Making Values have an influence on how we make decisions in our personal and professional lives. It is a difficult task to narrow the list of values to the top five. However, this paper will identify my top five professional values and their influences on my business decision making process.... [tags: Business Ethics]
1700 words (4.9 pages)
- An Introduction to Managerial Decision Making Phar-Mor, Inc., the nation’s largest discount drugstore chain, filed for bankruptcy court protection in 1992, following discovery of one of the largest business fraud and embezzlement schemes in U.S. history. Coopers and Lybrand, Phar-Mor’s former auditors, failed to detect inventory inflation and other financial manipulations that resulted in $985 million of earnings overstatements over a three-year period. A federal jury unanimously found Coopers and Lybrand liable to a group of investors on fraud charges.... [tags: Business Management Decision Making Essays]
4608 words (13.2 pages)
- Decision-making models, or the path that one would choose in his or her decision-making, is heavily relied on the information one has received. By having all the correct information available, decision-making becomes an easier task. The model in which one would base his or her decision-making upon can be analyzed into six different factors: the problem at hand, the goals that want to be reached, alternatives, pros and cons, decision(s), and reason(s) behind the decision(s). According to Richard W.... [tags: Business Decision Making]
836 words (2.4 pages)
Limited, or “Bounded,” Rationality
A manager must settle for limited or bounded rationality In other words, limitations of information, time, and certainty limit rationally even it a manager tries earnestly to be completely rational Since managers cannot be completely rational In practice, they sometimes allow their dislike of risk—their desire to “play It safe”—to Interfere with the desire to reach the best solution under the circumstances. Herbert & Simon called this satisfying, that is picking a course of action that is satisfactory or good enough under the circumstances Although many managerial decisions are made with a desire to “get by” as safely as possible most managers do attempt to make the best decisions they can within the limits of rationality and in light of the degree and nature of the risks involved.
We will now consider the steps of the decision—making process in detail.
Development of Alternatives and the Limiting Factor
Assuming that we know what our goals arc and agree on clear planning premises, the first step of decision making is to develop alternatives. There are almost always alternatives to any course of action; indeed, if there seems to be only one way of doing a thing that-way is probably wrong. If we can think of only one course of action, clearly we have not thought hard enough.
The ability to develop alternatives is often as important as being able to select correctly from among them On the other hand, ingenuity research and common sense will often unearth so many choices that none of them can be adequately evaluated. The manager needs help in this situation, and this help, as well as assistance in choosing the best alternative is found in the concept of the limiting or strategic lector,
A limiting factor is something that stands In the way of accomplishing a desired objective. Recognizing the limiting factors in a given situation makes it possible to narrow the search for alternatives to those that will overcome the limiting factors. The principle of the limiting factor states that, by recognizing and overcoming those factors that stand critically In the way of a goal, the best alternative course of action can be selected.
The Decision to Speed up the Decision-making Process at Granite Rock Co
The Granite Rock Company is a Watsonville, California, company that produces rocks, sand, gravel aggregates, and a variety of other products. The company was the 1992 winner of the much-coveted Malcolm Baldrige award, which recognizes outstanding performance in quality improvement.
Established in 1900, the company’s focus was on the “bottom line.” Employees knew It. and so did customers, who also felt that It was an Inflexible, centralized, bureaucratic firm. Bruce Woolpert, the company’s president and chief executive, recognized that it took too long to make decisions; indeed, it was felt that bureaucracy was killing the company. That started to change with the 1986 decision to turn the, organization chart upside down. Traditional organization charts show the president at the top and the customer contact people at the bottom. The change put the customers In. charge and on top. Three things turned the company around. First, all its employees discussed the current operation, and It was decided that special requests from customers would be granted, with the exception of illegal or immoral requests. Second, through surveys, customers were asked to rate the company from grade A to F together with written comments. Third, the company empowered customers to decide whether the company earned its pay. Specifically, the invoices stated:” If you’re not satisfied with the Granite Rock service or construction services you just received, then don’t pay us for it.” Because of it, the company became very much aware of what was wrong and consequently could make improvements. Many other companies go out of business without knowing the reason because most customers do not complain. At Granite Rock, the key 1986 decision of empowering the customer set the stage for the prestigious 1992 Malcolm Baldrige National Quality Award
Evaluation of Alternatives
Once appropriate alternatives, have been found, the next step in planning is to evaluate them and select the one that will best contribute to the goal.
This is the point of ultimate decision making although decisions must also be made in the other steps of planning—in selecting goals, in choosing critical premises, and even in selecting alternatives.
Quantitative and Qualitative Factors
In comparing alternative plans for achieving an objective, people are likely to think exclusively of quantitative factors. These are factors that can be measured in numerical terms, such as time or various fixed and operating costs. No one would question the importance of this type of analysis, but the success of the venture would be endangered if intangible, or qualitative; factors were ignored. Qualitative, or Intangible, factors are factors that are difficult to measure numerically, such as the quality of labor relations, the risk’ of technological changer or the ‘international political climate. There are all too many instances in which an excellent quantitative plan was destroyed by an unforeseen war, a fine marketing plan made inoperable by a long transportation Strike, or a. rational borrowing plan hampered by an economic recession These illustrations point out the Importance of giving attention to both quantitative and qualitative factors when comparing alternatives
To evaluate and compare the intangible factors in a planning problem and make decisions, managers must first recognize these factors and then determine whether a. reasonable quantitative measurement can be given to them. if hot6 they should find out as much as possible about, the factors, perhaps rate them in terms of their importance, compare their probable influence on ‘the outcome with that of the quantitative factors, and then come to a decision This decision may give predominant weight to a single intangible.
Evaluating alternatives may involve utilizing the technique of marginal analysis to compare the additional revenue and the additional cost arising from increasing output. Where the objective is to maximize profit, this goal will be reached, as elementary economics teaches, when the additional revenue and additional cost are equal. In other words, if the additional revenue of a larger quantity is greater than its additional cost, more profit can be made by producing more. However, if the additional revenue of the larger quantity is less than its additional cost, a larger profit can be made by producing less.
Marginal analysis can be used in comparing factors other than cost and revenue. For example, to find the best output of a machine, input could be varied against output until the additional input equals the additional output. This would then be the point of maximum efficiency of the machine. Or the number of subordinates reporting to a manager might conceivably be increased to the point at which additional cost savings, better communication and morale, and other factors equal additional losses in the effectiveness of control, leadership, and similar factors.
An improvement on, or variation of, traditional marginal analysis is cost- effectiveness, or cost—benefit, analysis. Cost-effectiveness analysis seeks the best ratio of benefit and cost; this means, for example, finding the least costly way of reaching an objective or getting the greatest value for a given expenditure.