The role of decision making

Managers need all six competencies to make a decision which are also basic competencies to managers.

Decision-making conditions

- these conditions reflect the environmental forces that individuals cannot control but may in future influence the outcomes of their decisions

- they are divided into Risks, Certainty and Uncertainty and form part of the decision-making process

Risk & Certainty and Uncertainty

Certainty can be defined as the condition under which individuals are fully informed about a problem, alternative solutions are obvious and the likely results of each solution are clear. Risk can be defined as the condition under which individuals can define a problem, specify the probability of certain events, identify alternative solutions and state the probability of each solution leading to the desired result. Uncertainty can be defined as the condition under which an individual does not have the necessary information to assign probabilities to the outcomes of alternative solutions.

Types of decisions

- the conditions under which decisions(routine, adaptive or innovative) are made provide a foundation for a comprehensive framework for decision-making

- types of problems and the types of solutions considered are reflected by the conditions mentioned above

Types of problems and solutions

- these problems can be rated from "well known" to "unusual and ambiguous"

- routine decisions are standard choices made in response to relatively well-defined and common problems with alternative solutions

- adaptive decisions are choices made in response to a combination of moderately unusual and fairly uncommon problems with alternative solutions

- innovative decisions are choices made based on the discovery, identification and diagnosis of unusual and ambiguous problems and/or the development of unique or creative alternative solutions

Goals and decision making

- decision making in organizations is coupled with goals in one of two ways: 1. the decision making process is triggered by a search for better ways to achieve established goals, and 2. the decision making process is triggered by an effort to discover new goals, revise current goals or drop outdated goals

- goals are crucial in giving employees, managers and organizations a sense of order, direction and meaning

- goals need to be attained and thus indicate the direction in which decisions and actions should be aimed and they are set so that they can yield benefits

- general goals also provide broad direction for decision making in qualitative terms

- these goals are set by the stakeholders, that is, customers, shareholders, suppliers, etc.

- these stakeholders have the power to create demand and constraints, which will in turn have an influence on the choice among organizational alternatives and goals

Decision making models

- there are three decision making models and they are the rational model, the bounded rationality model and the political model and these were created to describe various decision making processes

- the rational model prescribes a series of steps that an individual or teams should follow to increase the likelihood that their decisions will be logical and sound

- bounded rationality model emphasizes the limitations of rationality and thus provides a better picture of the day-to-day decision making process used by most people

- political model describes the decision making process in terms of the particular interests and goals of powerful external and internal stakeholders