Questions & Answers: Management – Managerial Decisions

List factors involved in individual decision-making.
Individual decision-making depends on a number of different factors. Some of these enhance decision-making, while others are obstacles to effective choices:
· Individual values: for instance aesthetic, political, ethical, economic, or religious.
· Personality, gender, and social status: in some cases, a person’s background can skew his or her perspective.
· Risk tolerance: the degree to which a manager can afford to make a risky decision. The assessment of risk will depend on the manager’s evaluation of advantages and disadvantages.
· Cognitive dissonance: the difference between the situation as it is and the manager’s perception of the situation. When there is a great degree of cognitive dissonance, decision-making tends to be poor.

List the steps in the decision-making process.
The first step in the decision-making process is to identify the problem to be solved. Next, a manager should make note of all the criteria related to the problem, as for instance the time, resources, and priority. The manager should place these decision criteria in order. Then, he or she can begin to generate options. Once the list is complete, all of the available options should be surveyed objectively, with due attention to advantages and disadvantages. After all of this information has been weighed, the manager should make the decision that creates the best possible outcome. The decision will then be implemented, after which point the manager should receive feedback and evaluate the success of his or her decision.

Discuss some aspects of managerial decision-making.
In general, managers find that they make better decisions when they have access to more information. However, it is also important for a manager to bring creativity, experience, and knowledge to the process of decision-making. Managers often draw a distinction between tactical decisions, which relate to the short term, and strategic decisions, which relate to the longer term. A particular decision may be characterized by certainty, uncertainty, or risk. That is, the decision-maker may have all of the necessary information, little of the necessary information, or some information but no guarantee of success.

Describe different decision-making styles.
Just as managers all have different personalities, so do they have different decision-making styles. For instance, analytical decision-makers take a rational, measured approach. The focus of such a decision-maker is always obtaining as much information as possible. A directive decision-maker, on the other hand, assembles important information but emphasizes the necessity of making a quick decision. A directive decision-maker is not afraid to take risk. A conceptual decision-maker tends to create a mental model of the situation, and then to base his or her decision on this model’s predictions. Finally, a behavioral decision-maker concentrates on the effects of the decisions of other people. This kind of decision-maker is likely to ask for the opinions of others before making a decision.

Discuss intuitive decision-making.
When a manager bases a decision on his or her beliefs or emotions, he or she is engaging in intuitive decision-making. Often, experienced managers make correct decisions without exactly knowing why. They just have a certain intuition derived from long interaction with a given set of variables. It can be difficult to make a case in support of such a decision, however. There are certain personality issues that can lead to poor intuitive decision-making. For instance, a manager might become overly convinced of his or her intuition, to the extent that he or she ignores obvious counterarguments. A manager might become addicted to making risky decisions. On the other hand, a manager might be afraid to make controversial decisions because of a fear of failure.

List some characteristics of managerial decision-making.
One of the common characteristics of decisions made by managers is a lack of predetermined structure. In other words, managers are often called upon to solve problems without easy solutions. Many of the decisions made in an organization have preprogrammed answers, but managers are often required to create innovative solutions. For this reason, managerial decision-making entails a high degree of uncertainty. Managers are always at risk of making bad decisions. The best a manager can expect to do is minimize the amount of risk. A manager can expect to feel conflicted internally when making a difficult decision, and can expect negative feedback from others when making an unpopular decision.

Describe the rational decision model.
In the rational decision model, the decision-maker uses all of the available data to select the most logical option. Of course, this is an idealized scenario; in real life, managers are always working with incomplete information. The rational decision model is most appropriate for programmed decisions and situations in which there is very little risk. Rational decision-making works better when decisions are made by a single person rather than a group. So long as the situation is predictable and all the advantages and disadvantages of various alternatives are clear, the rational decision model is the best.

Discuss systematic decision-making.
A manager who weighs the various alternatives before coming to a decision is engaging in a systematic decision-making process. One of the prerequisites for systematic decision-making is access to all relevant information. A manager needs to be able to isolate the information directly related to the decision, and must have access to employees who know a lot about the subject. A manager must be able to evaluate both sides of the issue and obtain more information when necessary. The manager should be able to construct logical counterarguments for his or her final decision. Also, the manager should know when to draw on the expertise of colleagues.

Discuss judgment errors that can occur in decision-making.
Managers who become experienced at making decisions may develop some bad habits. For instance, managers often develop shortcuts, known as heuristics, which simplify the decision-making process. These are often helpful, but sometimes may lead to error. In the availability heuristic, for instance, a manager relies on his or her own memory rather than available information. The representative heuristic, on the other hand, is the use of similar precedents to determine a decision, rather than attention to the facts as they are. Some decision-makers rely on an anchoring and adjustment model, in which obtained information becomes the foundation for future decision-making. Finally, some managers tend to stick by their decisions even when the evidence suggests they should do otherwise. This is known as the escalation of commitment to heuristic.

Describe the administrative decision model.
Unlike other models of decision-making, the administrative model is more descriptive than prescriptive. According to the administrative model, perfect information is never available and no person is perfect at analysis. For this reason, decision-making is a process of inevitable risk. This decision-making model seems most appropriate for complex and uncertain decisions. It also seems to be a better descriptor of group decision-making than unitary executive decision-making. A manager is charged with making a satisfactory decision, not necessarily the best decision.
Identify some barriers to effective decision-making.
There a number of psychological biases that can negatively impact decision-making. For instance, some managers have an illusion of control, which leads them to believe they have influence over uncontrollable factors. If a manager is suffering from the solution, he or she will be unlikely to adequately assess risk. Sometimes, a manager consistently makes bad decisions because he or she frames them incorrectly. In other words, the way information is presented can be as influential to decision-making as the content of the information. Some managers err by discounting the future, or overemphasizing short-term advantages at the expense of long-term factors. Finally, if a manager feels rushed, he or she is unlikely to make the best possible decision.