Group name:

#Inc.

Members that participated in the activity:

Initial & Surname	Student number	Contribution
N. Mosia	27310833	LO 1,2 and 4- Practical examples
M.S Hlalele	32008015	LO 4- Explanation and audio
R. Moloi	30121590	LO 5-Rational and bound rationality model
D.M Abraams	32622600	LO 1-Explanation
N.J Majara	32736924	LO 2-Definitions of certainty and uncertainty
B. Nkabinde	30063124	LO 3-Characteristics and audio
T Maropeng	29896819	LO 5-Political model
T.M Modjela	30971500	LO 2-Definitions of risk. LO 3-Practical examples

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.

Learning outcome 1

What is decision-making?

• Defining problems, gathering information, generating alternatives and choosing a course of action.
• It is the process of making a choice between a number of options and committing to a future course of action.

Role of decision-making:

MANAGERS	EMPLOYEES
1. Making good decisions can influence morale, for good or ill.	1. Improves workplace relationships.
2.Decision-making is related to planning, organizing, directing and controlling functions of a manager.	2. Participation in the decision-making process gives each employee the opportunity to voice their opinions and to share their knowledge with others.
3. It is important to achieve the organizational goals and objectives.	3. This improves the relationship between manager and employee, it also encourages a strong sense of teamwork among workers.

Practical examples:

Managers- The CEO of Food Lovers Market tries to make major decisions by trying to come to a consensus among the top minds in the company. When disagreements get expressed through the decision-making process, it helps make better decisions. It may take longer to make the decision, but once it is implemented it goes a lot faster because there isn't any resistance and sabotage that works its way through the organization.

Employees- The KFC manager recommends using one-on-one sessions to help make employees just a little comfortable sharing their advice and opinions.

Learning outcome 2

There are three different conditions under which decisions are made:

Conditions under certainty

It is where the decision-maker has full and needed information to make a decision. The manager knows exactly what the outcome will be, as she/he has enough clarity about the situation and knows the resources and time available for decision-making, the nature of the problem itself, possible alternatives to resolve the problem and be certain with the result of alternatives. Decision-making under certainty is the exception for most top managers, middle managers and various professionals. Day-to-day decisions are mostly done by first line managers which then make decisions under conditions of certainty.

Practical example

Managing director of a company puts aside a funding of R500 000 to cover the renovation of all executive offices. The money is kept in a savings account at a bank that pays 8% interest. Half of the money will be drawn out next month and the rest of the money when the job is completed in three months. The manager is certain how much is being invested, the length of investment time and the interest rate.

Conditions under risk

The individual can define a problem, specify the probability of certain events, identify alternative solutions and state the probability of each solutions leading to the desired result. The problem and alternative solutions fall somewhere between the extremes of being relatively common and well defined,and being unusual and ambiguous.

Practical example

A manager in a supplier department decides to spend R1 000 on a magazine advert believing there are three possible outcomes for the advertisement to have influence in their sales. A 25% chance the advertisement will have only a small effect on sales, a 55% chance of a moderate effect and a 20% chance of a very large effect. The decision is made under risk because the manager can list each potential outcome and determine the probability of each outcome occurring.

Conditions under uncertainty

Information not provided or incomplete , many unknowns and possibilities to predict expected results for decision-making alternatives. The manager cannot even assign subjective probabilities to the likely outcomes of alternatives. Each of the possible states of nature of the problems causes the manager himself not be able to predict with confidence what the outcomes of his actions will be. An assumption is often made; the manager has no information or intuitive judgement to use as a basis of assigning the probabilities to each state of nature. Managers may have to come up with creative approaches and alternatives to solve the problem. Dealing with uncertainty is an important facet of the jobs of many managers and various professionals such as research and development engineers, market researchers and strategic planners.

Practical example

John runs a small company that manufactures low-cost ergonomic stool and he sold via the internet. His company has several popular models, each with annual sales of R100 000 to R150 000. He has an opportunity to invest in a new technology of manufacturing stool. John knows that a new technology will cost R220 000 and is unsure whether there will be sufficient demand for the stool to cover this large investment. If the market is good, he thinks he can sell 4 000 chairs at a profit of R100 each, generating a cash flow with present value of R400 000. On the other hand, if the market is poor, he thinks he might sell only 1 000 chairs, generating a cash flow with present value of R100 000 in this situation, John does not have any information to help him decide and it is hard for him to make a decision from each probability that he made. Therefore he must use his rational and his business experience to make a best choice in order not to make his company loss in profit. John needs some skills and methods to make decisions under uncertainty. He needs techniques that match the limited time and money budgets of his small company. Therefore this situation on decision-making, he will try to have higher propensity and more practical level for the small business. 

Learning outcome 3

http://efundi.nwu.ac.za/portal/site/0646fc6a-16f4-46af-80ec-52ec22f34619/tool/a9bc32aa-73f6-4540-858c-e72ede9738a2#

(In dropbox if can't be accessed)

Learning outcome 4

http://efundi.nwu.ac.za/access/content/group-user/0646fc6a-16f4-46af-80ec-52ec22f34619/27310833/Learning%20outcome%204-1.mp3

(In dropbox if can't be accessed)

Learning outcome 5

The difference between the rational, bounded rationality and political models:

Rational Model- This model lays down a sequence of steps that an individual or teams should follow in order to increase the likelihood that their decisions will be logical and sound.

The rational decision-making is a process that consists of seven steps:

1. Define and diagnose the problem
2. Set goals
3. Search for alternative solutions
4. Compare and evaluate alternative solutions
5. Choose from among alternative solutions
6. Implement the solution selected
7. Follow up and control

Bounded rationality model- The idea that we make decisions that are rational, but within the limits of the information that is available to us and our mental capabilities.

Firstly information is imperfect and individuals make decisions based on that information. Secondly not all possible alternatives are evaluated by the individual before a decision is made.

The model refers to an individual's tendencies to do the following:

• Satisfying decision
• Limited search
• Inadequate information
• Information processing bias

Political model- The decision-making process in terms of the particular interests and goals of powerful external and internal stakeholders.

Before considering this model, we need to define power.

Power- It is the ability to influence or control individual, departmental, team or organizational decisions or goals.

FACTORS INFLUENCING THE POLITICAL DECISION-MAKING PROCESS

1. Stakeholders- They can affect or be affected by the organization's actions, objectives and policies.
2. Choice of goals- They are goals that people try to attain during a product selection and the attainment of these choice goals determined the satisfaction with the decision-making process.
3. Alternative solutions- They are solutions which differs from the acceptable solutions that have already been given.
4. Political decision-making- It is based on decisions made according to the political rules and the economic rules.