Understanding Management Decisions Making

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Running head: UNDERSTANDING MANAGEMENT DECISIONS MAKING

Abstract

Making decisions is one of the toughest jobs of the managers since the success and failure of organizations depends on the effectiveness of the decisions made along the way. The difference between a good and bad decision lies in the level of effectiveness of the decision depending on the quality of the decision and acceptance of the same by the employees. A structured decision making process where the rational, practical, and political factors are taken into account; where the engagement of concerned parties in the decision making process is ensured with inquiry approach increases the quality of the decision and to some extent the acceptance of the same. Nevertheless, the full acceptance depends mostly on the successful implementation of the decision.

Understanding Management Decisions Making Process and the Legal Consultancy Firm Case

Making the right strategic decisions enabling the organization to grow and gain competitive advantages is one of the most enduring challenges of the managers. Indeed, in today's hyper competitive world, the organizations confront with new and rapidly changing challenges. Therefore, setting right organizational goals and making strategic decisions to achieve those goals are crucial for the survival of the organizations. Everyday, the managers encounter various situations where they need to make decisions. While making decisions is the most important job of the managers, it is also the toughest and the riskiest (Keeney, Raiffa, & Hammond, 2006). The basis of success and the failure of the organizations depend on the decisions which are made along the way. Yet, the research shows that three-fourth of strategic decisions fail (Harvard Business Review OnPoint Collection, 2005). This high rate of failure may be due to various reasons. Most of the time, the reason lies in the deficiencies in the decision making process; the problem and the alternatives which were not clearly defined, failure in collecting right and adequate information, lack of adequate implementing strategy etc. Sometimes, it is due to the psychological traps in the way the managers think in making decisions or poor use of their cognitive powers (Harvard Business Review OnPoint Collection, 2005; Hammond, Keeney,& Raiffa, 2006). While choosing the right decision making model and tools for analysis which depend on the type of problem and the culture or management style used helps to reduce the deficiencies and thus increase the effectiveness of the strategic decisions, the awareness of the psychological traps helps managers to build tests and disciplines in the decision making process to avoid these traps (Keeney, Raiffa, & Hammond, 2006).

This study has two core purposes: (i) understanding the important aspects of management decision making process by defining the decision making process itself; exploring the different models/approaches; and the psychological traps in which the managers might be caught up whilst making decisions; and (ii) application of the decision making process to the legal consultancy firm case.

What is Decision Making Process?

Decision making can be regarded as an outcome of mental processes leading to the selection of a course of action among several alternatives. (Decision Making, n.d.). Decision is the choice made available from alternatives. The decision making is the process of identifying problems and opportunities and resolving them; a problem solving activity. The decision making process must be regarded as a continuous process integrated in the interaction with the environment (Decision Making, n.d.; Managerial Decision Making [PowerPoint slides], 2003). Research by Gravin and Roberto (2001) shows that the managers who make good decisions recognize decision making as process and explicitly design and manage decision making as such, while the managers who make bad decisions treat decision making as an event that occurs at a single point in time.

Decision Making Process Models/Approaches

Numerous models/approaches have been proposed for conducting the decision making process throughout the literature. The three basic decision making models are (i) the rational/classical model; (ii) the organizational/administrative process model/ practical approach; and (iii) the political model (Yang, 2003, p. 459).

Rational approach views decision making process as linear, step by step process towards maximizing outcomes; define the problem, identify the decision criteria, allocate weight to criteria, develop and evaluate alternatives and select the best alternative (Yang, 2003, p.459). As is put by Mintzberg and Westley (2001), the rational approach has a clearly identified process: define-diagnose-design-decide and implement the decision (p.89).

The rational approach assumes that the problem is clear and unambiguous; that there are complete and clear information regarding the situation; that the criteria and alternatives are clear and objective enough to be ranked and weighted to reflect their importance; and that the managers have unlimited time and resources. In essence, the rational approach sees the decisions as rational, value maximizing choices made among from clear alternatives under condition of certainty with complete information in order to accomplish logical goals that are known and agreed on. The approach provides guidelines for managers in order to reach ideal decisions (Yang, 2003, p. 459; Managerial Decision Making [PowerPoint slides], 2003).

However, decision making process is not always rational and does not follow the step by step logic. Managers actually make decisions in difficult situations characterized by uncertainty and ambiguity, and where the time and the sources are limited and the information is imperfect and incomplete (Managerial Decision Making [PowerPoint slides], 2003; Nicolas, 2004).

The practical approach advises the managers to be practical and flexible due to complexity and uncertainty of the organizational context (Yang, 2003, p. 465).

One of the main concepts shaping practical approach is the "bounded rationality" positing that managers have boundaries on how rational they can be (Managerial Decision Making [PowerPoint slides], 2003). This is one of the challenges of the rational approach (Yang, 2003). This concept has been brought by Herbert Simon suggesting that managers with bounded rationality, experience limits in formulating and solving the complex problems and processing the information (Bounded Rationality, n.d.). When the situation is complex in which the managers are constraint by the limited time and resources, ambiguous and poorly defined problems, incomplete information about alternatives, they tend to decide on and pursue the solution satisfying the minimum requirements to achieve a goal instead of optimizing the outcome (Yang, 2003, p. 460).

Another challenge to the rational decision making is the intuitive decision making which refers to an unconsciousness process arising from experience. The research has shown that intuition is commonly used by the managers in making decision and improves the decision making process (Yang, 2003, p. 460). According to the study conducted by Andersen (2000), the decision making approach of the managers is related to the organizational effectiveness and more specifically, the managers with intuitive decision making supported by thinking and sensing are related to the effectiveness. The research has shown that when the problems are structured; issues are clear and the information is reliable, the mangers tend to use analytic reasoning due to the existing of well accepted decision rules. However, when the problems are more complex, they tend to put greater weight to the intuitive judgment relative to the analytic reasoning (Yang, 2003, p. 460). It should be also noted that using intuitive decision making does not mean never using rational decision making. Both are complementary and can lead to the effectiveness when used together. For effective managers, the important thing is having the ability to be rational when it is necessary and feasible and having courage to be intuitive when the analytical reasoning is no longer feasible (Holloman, 1989).

Similarly, each of the three approaches brought by Mintzberg and Westley (2001); thinking first (which features the qualities of science and relates to the programming, planning and facts), seeing first (which features the qualities of art and relates to visioning, and insight); and doing first (which features the qualities of craft and relates to venturing, learning and experiences and which is intuitive) (p.91) works best in different situations; "thinking first" works best when the issue is clear, the data reliable and the world structured; when thoughts can be pinned down and discipline applied, as in an established production process. "seeing first" is necessary when many elements have to be combined into creative solutions and when commitment to those solutions is key, as in much new-product development. "doing first" is preferred when the situation is novel and confusing, and things need to be worked out. The combination of these three approaches leads to the improvement of the quality of the decisions (Mintzberg, Westley, 2001, p. 93, 89).

The political