OER-CRAFT

DECISION MAKING

MFS_COU_3_EN  

 Title:
DECISION MAKING
 Keywords
decision-making, decision-making process, decision making styles, individual and group decision-making, ethical decision making
 Author:
AGH
 Languages:
English
 Objectives/goals:

Student should be able to:
a)    Define decision-making concept and understand the role of decision making in organization management process.
b)    Identify main characteristics of decision making process, describe the eight steps in the decision making process and distinguish between different decision making styles
c)    Identify pros and cons of individual and group decision making process
d)    Determine what an ethical decision is, identify situational influences on ethical decision making and identify points of leverage for managing and improving ethical decision-making
 


 Description:
A decision can be defined as a course of action purposely chosen from a set of alternatives to achieve objectives or goals. Decision-making is an integral part of modern management. Essentially, rational or sound decision making is taken as primary function of management in every companies.
 
This course is meant to help you develop your decision skills, be more conscious about differences between individual and group decision-making, and identify your personal decision-making style.


 Contents



 Course contents:

 Decision making basics

Decision Making ‚Äď Introduction

Clic to read  Decision Making ‚Äď Introduction



Individuals at all levels and in all areas of organizations make decisions. This it, they make choices from two or more alternatives. Decisions are made in the best interest of the organization. For that matter, decisions made by the organization are to lighten the way forward. Every organization needs to make decisions at one point or other as part of managerial process. As a matter of fact, capable of taking critical decisions is one of the many attributes that every manager should have, be it top level or middle or entry level. For instance, top-level managers make decisions about their organization’s goals, where to locate manufacturing facilities, what new markets move into, and what products or services to offer. Middle- and lower level managers make decisions about weekly or monthly production schedules, problems that arise, pay rises, and disciplining employees. While small organization involves all levels of managers, complex organizations largely depend on a team of professionals specially trained to make all sorts of decisions. But making decision isn’t something that only managers do. All organizational members make decisions that affect their jobs and the organization they work for.



Definition of decision making

Clic to read  Definition of decision making



As it was said in previous section, decision-making is an integral part of modern management. Essentially, rational or sound decision making is taken as primary function of management. Decisions play important roles as they determine both organizational and managerial activities. A decision can be defined as a course of action purposely chosen from a set of alternatives to achieve organizational or managerial objectives or goals.
According to the Oxford Advanced Learners Dictionary the term decision making means - the process of deciding about something important, especially in a group of people or in an organization.

As Chris Ogueri claims, making a decision implies that there are alternative choices to be considered, and in such a case we want not only to identify as many of these alternatives as possible but to choose the one that: (1) has the highest probability of success or effectiveness and (2) best fits with our goals, desires, lifestyle, values, and so on. The two important ideas here are that first, there must be some genuine alternatives to choose from. Note that "Do it" or "Dont do it" does not qualify as a set of alternatives. Only "Do this" or "Do something else" really qualifies. Second, every decision must be made in the light of some standard of judgment. This standard usually gets expressed in the form of criteria, which reflect the values and preferences of the decision maker. These values and preferences are often influenced by certain factors, cooperate rules or culture, law, best practices, and so forth.




Decision making characteristics

Clic to read  Decision making characteristics



Decision making has many features, some of which are considered below:

1.    Decision making implies choice - decision making is choosing from among two or more alternative courses of action. Thus, it is the process of selection of one solution out of many available. The alternative selected may be correct or incorrect. This will however be decided in the future when the results manifests.

2.    Continuous activity/process - decision-making is a continuous and dynamic process. It pervades all organizational activity. Managers have to take decisions on various policy and administrative matters. It is a never ending activity in management.

3.    Mental/intellectual activity - Decision-making is a mental as well as intellectual activity or process and requires knowledge, skills, experience and maturity on the part of a decision-maker.

4.    Based on reliable information/feedback  - good decisions are always based on reliable information. The quality of decision-making at all levels of an organization can be improved with the support of an effective and efficient management information system.

5.    Goal oriented process - decision-making aims at providing a solution to a given problem or difficulty faced by an organization.

6.    Means and not the end - decision-making is a means for solving a problem or for achieving a target or objective and not the end in itself.

7.    Relates to specific problem - decision-making is not identical with problem solving but it has its roots in a problem itself.

8.    Time-consuming activity - decision-making is a time-consuming activity as various aspects need careful consideration before taking final decision. For decision makers, various steps are required to be completed. This makes decision-making a time consuming activity.

9.    Needs effective communication - decisions taken, need to be communicated to all concerned parties for suitable follow-up actions. Such decisions will remain on paper if they are not communicated to concerned persons. Follow-up actions will not be possible in the absence of effective communication.

10.    Pervasive process - decision-making process is all pervasive. This means managers working at all levels have to take decisions on matters within their jurisdiction.

11.    Responsible job - decision making is a responsible job as wrong decisions prove to be too costly to the organization. Decision makers should be matured, experienced, knowledgeable and rational in their approach. Decision making need not be treated as routing and casual activity. It is a delicate and responsible job  (Ogueri 2019).



 Decision making styles

Decision making styles: directive, analytic, conceptual, behavioural

Clic to read  Decision making styles: directive, analytic, conceptual, behavioural



Directive style
Decision makers using directive style have low tolerance for ambiguity and are rational in their way of thinking. They are efficient and logical. Directive types make fast decisions and focus on the short run. Their efficiency and speed in making decisions often result in their making decisions with minimal information and assessing few alternatives.

When to use directive decision-making
This style of decision-making lends itself well to situations characterized by stability, repeating patterns, and consistent events. Reserve directive decisions for instances where there is a clear and undisputed cause-and-effect relationship; in other words, a right answer exists and is understood collectively.

Signs you need to use a different approach
When operations are running smoothly, it is easy for leaders to fall victim to complacency. Leaders need to be mindful of the changing complexity of particular situations. If you start using direct decisions to make complex jobs simple, you need to change your approach. Understand that changing circumstances call for changing decision-making styles.

Analytic style
Decision makers with an analytic style have much greater tolerance for ambiguity than directive style. They want more information before making a decision and consider more alternatives than directive style decision maker does. Analytic decision makers are characterized as careful decision makers with the ability to adopt or cope with unique situations.

When to use analytic decision-making
Analytic decisions are helpful in situations where there may be more than one right answer. Use this style of decision-making to solve problems where the cause-and-effect relationship is discoverable but not immediately apparent. Primarily, you are using this approach to explore several options or solutions and using fact-based management to guide appropriate action.

Signs you need to use a different approach
The most significant warning sign of overuse of the analytic decision style is analysis paralysis. If you find yourself functioning in a state of over-analyzing or over-thinking without action or reaching a decision, you need to drop this approach.

Conceptual style
Individuals with a conceptual style tend to be very broad in their outlook and look at many alternatives. They focus on the long run and are very good at finding creative solutions to problems.

When to use conceptual decision-making
Apply conceptual decision-making to problems that involve many competing ideas. This style of decision is best suited for situations characterized by unpredictability and suited to creative and innovative approaches. In these scenarios, you find there is no immediate solution, but patterns emerge over time. Using a conceptual style of decision-making accounts for long-term planning and unknown variables. 

Signs you need to use a different approach
If the decision you need to make involves a situation that needs structure and defined outcomes, you should not use a conceptual approach. As well, decisions that need to drive immediate results and circumstances where there is little room for error do not fall under conceptual decision-making.

Behavioural style
Decision makers with a behavioural style work well with others. They are concerned about the achievements of those around them and are receptive to suggestions from others. They often use meetings to communicate, although they try to avoid conflict. Acceptance by others is important to this decision-making style.

When to use behavioural decision-making
Like conceptual decision-making, the behavioural style requires proactive communication. This style takes a more introspective approach by discussing solutions that have worked in the past rather than trying to reveal new patterns.

Signs you need to use a different approach
If group discussion sessions never reach an agreement, you may need to consider another approach. In contrast, if new ideas never come up or no one challenges opinions, behavioural decision-making may not be the best option either. While this style of decision works to benefit the group as a whole, it requires a definite and decisive leader to get things accomplished. If necessary, look for ways and experiments to force people to think outside of whats familiar.




Levels of decision making

Clic to read  Levels of decision making



Level 1: Leader makes the decision alone & announces.
This level takes little time and no involvement. This is used especially in emergency situations where immediate action is critical. Input is not helpful, quick action and immediate compliance is what counts. Unfortunately, some leaders use this level when there is no emergency and more time could be taken to involve others and to use another Decision Making Level.

Level 2: Leader gathers input from individuals and decides.
The leader seeks input, usually to cover blind spots and enhance their depth of understanding around the issue to be decided. Key individuals hold important information and not consulting them would be foolish.

Level 3: Leader gathers input from team and decides.
Leader holds a team meeting and solicits input from them; he listens to the teams ideas and then takes that information and decides.

Level 4: Consensus building.
At this level the leader is part of the team and he/she is just one vote/voice among many. The group processes all the decisions involved, compromises positions until everyone is in agreement. Consensus is reached when everyone feels comfortable with the decision, feels like their thoughts and opinions have been heard and everyone agrees to stand behind the decision.

Level 5: Consensus and delegates with criteria/constraints.
Leader fully delegates the decision to the team and is not a part of the decision making discussions. This level requires the leader to be very clear with the team as to what are the criteria/constraints that must be met for their decision to be able to move forward. Failure to meet those criteria could result in the team being sent back to the drawing board or the leader choosing a fall back option and utilize another level for moving the decision forward.



 Decision making process

Decision making process ‚Äď introduction

Clic to read  Decision making process ‚Äď introduction



Making decisions is a part of everyday life. Some consider it an art, others a proficiency. Decisions may be personal or professional, but, in each case, the choices will often have lasting consequences. In other words, the decisions we make have the potential to affect ourselves and others in the short and long term. Therefore, it is valuable to possess a skill set that will allow you to reflect and weigh alternatives - finally electing the option that is the most appropriate for each situation.

Although decision making is typically described as "choosing among alternatives", that view is to simplistic. In fact, decision making is a comprehensive process, not just a simple act of choosing among alternatives. Even for something as straight-forward as deciding where to go to lunch, you do more than just choose burgers or pizza. Granted, you may not spend a lot of time contemplating a lunch decision, but you still go through the process when making that decision.

Depending on the source and certain concepts, decision making is described as a process that consists of 6 to 11 steps. In this unit we will present the concept that identifies a set 8 steps of making decision that begins with identifying a problem and decision criteria and allocating weights to those criteria; then moves to developing, analysing, and selecting an alternative that can resolve the problem, implements the alternative; and concludes with evaluating the decisions effectiveness. This process can be used to describe both individual and group decisions.





Eight steps of decision making process

Clic to read  Eight steps of decision making process



1- Identifying a problem
The decision making process begins with the existence of a problem or, more specifically, a discrepancy between an existing and a desired state of affairs. Effective defining problems isnt simple or trivial. In  order  to  identify  a  problem, you  as should recognize  and understand the three characteristics of problems:

‚Äʬ†¬†¬† You¬† must¬† be¬† aware¬† of¬† the¬† problem.¬† Be¬† sure¬† to¬† identify¬† the¬† actual problem rather¬† than a symptom of the problem.
‚Äʬ†¬†¬† You must be under pressure to act. A true problem puts pressure on decision maker to take action; a problem without pressure to act is a problem that can be postponed.
‚Äʬ†¬†¬† You¬† must¬† have¬† the¬† authority¬† or¬† resources¬† to act. When one¬† recognizes¬† a¬† problem and¬† is under¬† pressure¬† to¬† take¬† action¬† but¬† do¬† not¬† have¬† necessary¬† resources,¬† he or she usually¬† feels¬† that unrealistic demands are being put upon him/her.

2- Identifying decision criteria
Once you have identified a problem, the decision criteria important to resolving the problem must be identified. That is, you must determinate what iss relevant in making decision. Whether explicitly stated or not, every decision maker has criteria that guide his or her decision. These might include criteria such as:

‚Äʬ†¬†¬† Costs that will be incurred (investments required)
‚Äʬ†¬†¬† Risks likely to be encountered (chance of failure)
‚Äʬ†¬†¬† Outcomes that are desired (growth of the firm)

3- Allocating  weights  to  the  criteria
If the criteria identified in step 2 are not equally important, the decision maker must weight the items in order to give them the correct priority in the decision. A simple approach to weight criteria is to give the most important criterion a weight of 10 and then assign weights to the rest against the standard. Thus, a criterion with a weight of 10 would be twice as important as one given a 5. Of course, you could use any other scale or any number as the highest weight. The idea is to prioritize the criteria you identified in step 2 by assigning a weight to each.

4- Developing alternatives
The fourth step in the decision-making process requires the decision maker to list viable alternatives that could resolve the problem. In this step, a decision maker needs to be creative.

5- Analysing  alternatives
Once the alternatives have been identified, a decision maker must critically analyse each one by appraising it against the criteria established in steps 2 and 3. From this comparison, the strengths and weaknesses of each alternative become evident.

6- Selecting  an  alternative
The sixth step is choosing the best alternative from among these considered. Once all the pertinent criteria in the decision have been weighted and viable alternatives analysed, we merely choose the alternative that generated the highest total in step 5.

7- Implementing  the  alternative
Step 7 is concerned with putting decision into action This involves conveying the decision on those affected by it and getting their commitment to it. If the people who must carry out a decision participate in the process, they are more likely to enthusiastically support the outcome than if you just tell them what to do.

8- Evaluating  decision  effectiveness
The last step in the decision making process involves evaluating the outcome of the decision to see if the problem had been resolved. If the evaluation shows that the problem still exists, then the decision maker needs to assess what went wrong.
‚Äʬ†¬†¬† Was the problem incorrectly defined?
‚Äʬ†¬†¬† Were errors made when evaluating alternatives?
‚Äʬ†¬†¬† Was the right alternative selected but poorly implemented?

The answers might lead you to re-do an earlier step or might even require starting the whole process over.



 Individual & group decision making

Pros and cons of group decision making

Clic to read  Pros and cons of group decision making



Group decision making is a type of participatory process in which multiple individuals acting collectively, analyze problems or situations, consider and evaluate alternative courses of action, and select from among the alternatives a solution or solutions. It has certain pros and cons, few of which are mentioned below:

Pros of group decision making

‚Äʬ†¬†¬† Group decision-making, ideally, takes advantage of the diverse strengths and expertise of its members. By tapping the unique qualities of group members, it is possible that the group can generate a greater number of alternatives that are of higher quality than the individual. If a greater number of higher quality alternatives are generated, then it is likely that the group will eventually reach a superior problem solution than the individual.

‚Äʬ†¬†¬† Group decision-making may also lead to a greater collective understanding of the eventual course of action chosen, since it is possible that many affected by the decision implementation actually had input into the decision. This may promote a sense of "ownership" of the decision, which is likely to contribute to a greater acceptance of the course of action selected and greater commitment on the part of the affected individuals to make the course of action successful.

Cons of group decision making

‚Äʬ†¬†¬† Groups are generally slower to arrive at decisions than individuals, so sometimes it is difficult to utilize them in situations where decisions must be made very quickly.

‚Äʬ†¬†¬† One of the most often cited problems is groupthink. Groupthink occurs when individuals in a group feel pressure to conform to what seems to be the dominant view in the group. Dissenting views of the majority opinion are suppressed and alternative courses of action are not fully explored.

‚Äʬ†¬†¬† Group polarization is another potential disadvantage of group decision-making. This is the tendency of the group to converge on more extreme solutions to a problem. The "risky shift" phenomenon is an example of polarization; it occurs when the group decision is a riskier one than any of the group members would have made individually. This may result because individuals in a group sometimes do not feel as much responsibility and accountability for the actions of the group as they would if they were making the decision alone.




Pros and cons of individual decision making

Clic to read  Pros and cons of individual decision making



Individuals have a tendency to think and question before performing. This is fruitful in analysis and forecasting of individuals behaviour. Individual decision making has certain pros and cons, few of which are mentioned below:

Pros of Individual Decision Making

- An individual generally makes prompt decisions. While a group is dominated by various people, making decision-making very time consuming. Moreover assembling group members consumes lot of time.

- Individuals do not escape responsibilities. They are accountable for their acts and performance. While in a group it is not easy to hold any one person accountable for a wrong decision.

- Individual decision making saves time, money and energy as individuals make prompt and logical decisions generally. While group decision making involves lot of time, money and energy.

- Individual decisions are more focused and rational as compared to group.

Cons of Individual Decision Making

- A group has potential of collecting more and full information compared to an individual while making decisions.

- An individual while making any decision uses his own intuition and views. While a group has many members, so many views and many approaches and hence better decision making.

- A group discovers hidden talent and core competency of employees of an organization.

- An individual will not take into consideration every members interest. While a group will take into account interest of all members of an organization.



 Ethical aspects in decision making

Ethical decision

Clic to read  Ethical decision



Ethical decision is concerned with a judgement about right and wrong. This means, it deals with moral issues. There are a number of factors that indicate at the moral status:

a)¬†¬†¬† The decision is likely to have significant effect on others ‚Äď it is concerned with harms and benefits, consideration of social good, i.e. considerations of others beyond the the self.

b)    The decision is likely to be characterized by choice, in that alternative courses of action are open. Moral decision requires that the deciders has a choice.

c)    The decision is perceived as ethically relevant by one or more parties. Regardless of whether the decision-maker sees a decision as having ethical content, if others do, than the decision immediately incurs some degree of ethicality.




Ethical reasoning

Clic to read  Ethical reasoning



The ability to assess whether something is right or wrong requires basic knowledge about the way how  can we assess it (ethical reasoning) and reflection of criteria we use to provide the assessment.

There are two major ethics theories that attempt to specify and justify moral rules and principles: utilitarianism (also called consequentialism) and deontological ethics.




Stages in ethical decision making

Clic to read  Stages in ethical decision making



The ethical decision making models seek to represent two things: [1] The different stages in decision-making people go through in responding to an ethics problem in a business context; [2] the different influences on that process.

I.    Recognize a moral issue
II.    Make some kind of moral judgement about that issue
III.    establish an intention to act upon that judgement
IV.    act according to the intentions.

Moral judgements can be made according to consideration of rights, duty, consequences, etc (different ethical theories). However most research indicate that managers tend to rely primary on consequentialist thinking. See in attached slides the example of consequentialists ethics. 





Influences on ethical decision-making

Clic to read  Influences on ethical decision-making



Individual factors
These are unique characteristics of the individual actually making the relevant decision. These include factors which are given by birth (e.g. age, gender) and those acquired by experience and socialization (e.g. education, attitudes)

Situational factors
These are the particular features of the context that influence whether the individual will make an ethical or an unethical decision. These include factors associated with the work context (e.g. reward systems, job roles, organizational culture) and those associated with the issue itself (such as the intensity of the moral issue, or the ethical framing of the issue)

Rationalizing unethical behavior
Rationalizations tactics are mental strategies that allow individuals to view their corrupt acts as justified. It is a part of process of moral framing, that justifies unmoral actions. Under such a strategies we can identify: denial of responsibility, denial of injury, denial of victim, social weighting, appeal to higher loyalties, metaphor of the ledger (e.g. individuals argue that they are entitled to indulge in deviant behaviors because of their accrued credits) See attached slides.


 Results


 Indicators


 Bibliography

•    Blowfield M, Murray A (2013) Corporate Responsibility, Oxford Press
•    Brian G. Barnes, Critical thinking structures for business ethics
•    Crane A., Matten D., Business Ethics. Managing corporate citizenship and sustainability in the age of globalization, Third Edition, Oxford University Press 2010
•    Drucker P. (2006) The Practice of Management, HarperBusiness.
•    http://www.businessdictionary.com/definition/evaluation.html
•    https://enterprisersproject.com/article/2018/7/4-styles-decision-making-leaders-guide
•    https://ethicsunwrapped.utexas.edu/glossary/
•    https://legaldictionary.net/ethical-reasoning/
•    https://www.decision-making-solutions.com/glossary_p.html#Problem_solving
•    https://www.lexico.com/en/definition/problem).
•    https://www.managementstudyguide.com/decision-making.htm
•    https://www.managementstudyguide.com/management_levels.htm
•    https://www.referenceforbusiness.com/management/Gr-Int/Group-Decision-Making.html
•    https://www.universalclass.com/articles/business/the-basics-of-the-decision-making-process.htm
•    Moreland J.P. Article ID: DE197-1 | Christian Research Institute https://www.equip.org/article/ethics-theories-utilitarianism-vs-deontological-ethics/
•    Ogueri Ch. Decision Making As A Managerial Tool In An Organization, source: https://www.academia.edu/6611642/Decision_Making_as_a_Managerial_Tool_in_an_Organization [10.11.2019].
•    Robbins S.P., Coulner M. (2005) Management, Pearson Education International.
•    Trewartha R.L., Newport M.G. (1982) Management, Dallas and Business Publication.


 Related material:
4.3_artcademy_course-decicion_making-agh.doc
 Training Fiche PPT:
4.3_artcademy_course-decicion_making-agh.pptx