MG4031 Week 06 Lecture 01 PDF

MG4031 Wk.06 Lec.01 Decision Making: The selection of a course of action from among alternatives. Programmed Decisions: Well structured, routine and repetitive, occurring on a regular basis, usually at lower levels of the organisation. They have short term consequences and are based on readily ava...

MG4031 Wk.06 Lec.01 Decision Making: The selection of a course of action from among alternatives. Programmed Decisions: Well structured, routine and repetitive, occurring on a regular basis, usually at lower levels of the organisation. They have short term consequences and are based on readily available information. They can involve the application of a previously established decision rule. E.g. Redundancy Calculations. Non-Programmed Decisions: New and unstructured and don’t involve the application of a previously established decision rule, instead, judgement and creativity are often used. There are no established procedures or records for dealing with it, therefore they can appear to be highly complex. They are taken by high level management and have long term consequences. E.g. whether or not to expand to an unknown market. Characteristics of Management Decisions include: Lack/Presence of Conflict Lack/Presence of Information or Structure Uncertainty/Certainty Decision Making Conditions: 1. Certainty: That the available alternatives and their costs or benefits are certain. Alternatives will lead to definite outcomes. Very few decisions can be made with certainty due to factors such as digital disruption, trade wars, changing tax scenarios, etc. 2. Risk: All the available choices and their potential costs and benefits are known, but the outcomes are sometimes unknown. E.g. rolling a die. Objective Probability: The likelihood of an event occurring based on the hard quantitative data, normally statistical. Subjective Probability: The likelihood of an event occurring based on personal judgement. 3. Uncertainty: The alternatives, likelihood of their occurrence and the outcomes are all unknown. The most difficult decisions due to the lack of concrete knowledge, tend to be ambiguous and intangible. They require intuition and judgement. Decision Making Process: 1. Identify + Diagnose the Problem: Recognising that action must be taken. A problem is a discrepancy between the current state of affairs and a desired state of affairs. It must be identified in precise terms. Identification must be followed by a willingness to rectify. The true cause of the problem must be assessed by selecting all relevant information.  2. Identify Alternatives: More alternatives broaden the organisation’s options. The organisation may look towards ready-made solutions or custom-made solutions. Custom-made solutions often enhance competitive advantage. 3. Evaluate Alternatives: This is required to choose the best solution. The advantages and disadvantages of each, as well as the costs and benefits of each, should be explored. Evalutation may be intuitive or based on scientific analysis, typically a combination of both. Contingency plans can also be developed at this stage. 4. Choose Alternative: The most suitable one is chosen. If none are considered suitable, step 2 should be repeated. 5. Implementation: This stage is critical to the success of the decision. Those who are implementing it must fully understand why the choice was made and why it is being implemented, and they must be fully committed to its success. Many decisions fail at this point, so many organisations push decision making down the chain of command to create a sense of ownership. 6. Evaluate: Feedback must be provided. This should take place at all levels of the organisation. It allows the results of the decision to be seen and helps identify any necessary adjustments. It should be an ongoing process. Barriers to Good Decision Making: Decisions are framed in terms of gains and losses from a reference point. However, when faced with a choice between two losses, managers often choose a risky decision, which may be worse than the two losses. Decision making is susceptible to psychological biases. Feelings and emotions often have an effect. The illusion of control, that managers develop a sense that they can influence outcomes even when they have no control over events. Too much attention being placed on short-term gains rather than long-term, sustainable success, as long-term strategies often require short-term pain. This is discounting the future. Time pressures can rush decision making, all options may not be researched thoroughly, effecting the quality of the decision. To prevent this, managers must focus on real time information, involve people more effectively and efficiently rely on trusted experts and take a realistic view of conflict. References: Notes based on MG4031 Lecture Slides and Modern Management: Theory and Practice for Students in Ireland (5th Ed.) - Tiernan S. and Morley, M.J. Chapter 5.