LEARNING OUTCOMES:

1. Define decision-making and explain the role of decision-making for managers and employees
2. Discuss the conditions of certainty, risk, and uncertainty under which decisions are made
3. Describe the characteristics of routine, adaptive, and innovative decisions
4. Explain how goals affect decision-making
5. Differentiate between the rational, bounded rationality, and political models of decision-making.

Group name:

El éxito (The Success) Ltd.

Members that participated in the activity:

Initial & Surname	Student number	Contribution
T, MAKHANDA	31935125	Learning outcome1
P, MOFOKENG	26932520	Learning outcome1
T, MATOLO	29930537	Learning outcome2
A, MZULWINI	31990339	Learning outcome3
N.F, DUBE	31749860	Learning outcome3
M, MANALA	30654246	Learning outcome4
M, MTHEMBU	30831385	Learning outcome4
I.O.K, KUNGWANE	25521845	Learning outcome5
K, KUBHEKA	31759947	Learning outcome5

Learning Outcome 1: Define decision-making and explain the role of decision-making for managers and employees

Decision-making is the thought process of selecting a logical choice from the available options. It includes defining the problems, gathering information, generating alternatives and choosing course of action.

Example: An effective manager relies on all six managerial competencies to make a decision. Conversely, decision-making processes are basic to all managerial competencies. The ability of Mr Akio Toyoda, CEO of Toyota, to envision transforming the company into the “world’s largest car manufacturer” demonstrates his strategic action competency. He then had to rely on his planning and administration competency to form a management team that would choose and implement a strategy through which to achieve this vision.

Learning outcome 2

Discuss the condition of certainty,  risk and uncertainty under which decisions are made 

Certainty 

The condition of certainty exists in case of routine decisions such as allocation of resources for production, payment of wages and salary etc. When the certainty conditions are present, it can be reasonably expected by managers what is going to happen when a decision has been taken by them. When outcomes are known and their consequences are certain, the problem of decision is to compute the optimum outcome. Certainty condition under which the manager is well informed about possible alternatives and their outcomes. Similarly, if there are more than one alternative, they are evaluated by conducting cost studies of each alternative and then choosing the one which optimizes the utility of the resources. There is a little ambiguity and relatively low chance of making and impractical decision. In these situations, managers use a deterministic model, and it is assumed that all factors are exact and there is no role for chance. There is only one outcome for each choice. 

Risk

In such a condition, managers have knowledge about alternative course of actions, but outcomes are associated with probability estimates. It is more difficult to predict future conditions without full information, so the outcome of an alternative cannot be accurately determined. Therefore, managers can guess the probable outcome based on their experience, research and other available information. For this purpose, several tools are available to the managers that can help in taking decisions under risk conditions. Decision making under conditions of risk is accompanied by moderate ambiguity and chances of an impractical decision. On the other hand, the managers may also use subjective probability that is based on their experience and judgment. However, such decisions are largely subjective as no decision criteria are fully reliable. Mostly the managers must take business decisions under risk situations.

Uncertainty

To make effective decision in uncertain conditions, managers must acquire as much relevant information as possible and approach the situation from a logical and rational perspective. However, there are certain techniques that can be used by the managers for making a better decision under uncertainty conditions. In case of uncertainty conditions, very little information is available to the managers and the managers are not sure regarding the reliability of such information. For example, they may use decision trees, risk analysis and preference theory for making the right decisions in uncertainty conditions. However, decision under uncertainty is the most ambiguous for managers and there is more possibility of error. The condition of uncertainty arises when the organization introduces a new or innovative product or service, adopts new technology, selects new advertising program etc. Managers have limited information to calculate the degree of risk, so statistical analysis is not possible. Hence, In conclusion, we can say that greater the amount of reliable information, the more likely the manager will make a good decision.

Learning outcome 3

Types of problems and solutions

The types of problems and solutions that managers and other employees deal with differ from common and properly defined to complicated and unusual. Certain occupations require a procedural way of solving problems, some managers and professionals often need to develop solutions that are out of the box.

Routine decisions

Are decisions made on well-defined and common problems with alternative solutions. It is often covered by establish rules and standard operating procedures and are taken on by lower level management. For example, ways of dealing with grievances is dealt with routinely, the employees with the problem have to go to their supervisor and formally explain their grievance and after that the supervisor takes it to the manager to be dealt with.                                                                                               Or the self-service kiosk at the cinema breaks or glitches the employees either fix the machines or customers have to wait in line at a concession stand.

Adaptive decisions

Are decisions made in response to a combination of both moderately unusual and fairly uncommon problems with alternative solutions. It often involves modifying and improving past routine decisions, it in fact deals with continuous improvement, the key concept of TQM. Adaptive decisions are driven by better quality, improving efficiency and being responsive to customers. An example could be steers and MacDonald’s getting customers complaints about having long lines. They then came up with an adaptive solution of having self-service systems.

Innovative decisions

Are choice based on the discovery, identification and diagnosis of unusual and ambiguous problems and/or development of unique or creative alternative solutions. They do not happen in a logically sequence but take a number of years and involve numerous professional specialists and teams.            For example, Netflix was just a streaming service to watch award winning movies, now it makes its own original movies and is making cinemas run for their money because you can watch movies that are in cinemas at the comfort of your home. Netflix is an example of an innovation business model.

Learning outcome 4

Goals and decision- making

Goals are essential in instilling order, direction and also giving managers and employees an incentive to work harder towards achieving the goals of the business.

Setting goals is most important in adaptive and innovative decision making.

Decision making in the business is grouped in one of the two ways when conditions of risk and uncertainty are taken into consideration:

First, the decision making process is activated by finding ways to accomplish goals that were established.

second, it is activated by identifying new goals, evaluating current goals and eliminating old goals

The nature of goals

Indicate the direction in which decisions and actions should be aimed.

Goals specify the quality and quantity of the desired results.

Guide individual behavior

Goals can cover the long term or short term

Why people set goals

Individuals and organisation set goals because they serve to focus on their efforts and the decisions. For the organisation, they provide a set of stated expectation that everyone involved can understand and work towards achieving that goal. They help in the the planning process, motivate and encourage individuals to improve their performance. Specific goals help improve the orgarnisation's productivity and the quality work. Goals also assist in controlling business operations and evaluating performance within a business- among employees.

 Learning outcome 5

Differentiate between rational, boundary rationality, and political models of decision making

The rational model prescribes a series of steps that individuals or teams should follow to increase the likelihood that their decisions will be logical and sound whereas the bounded rationality, which emphasises on the limitations of rationality and explains why different individuals make different decision when they have exactly the same information. The political model describes the decision making process in terms of the particular interest and goals of powerful external and internal stakeholders.

The rational model is used mainly for making routine low risk decisions. This gives a better perspective of the day to day decision making processes used by most people. Political processes are most likely to occur when decisions involving powerful stakeholders, disagreements over choice of goals and people who are not searching for alternative solutions