Group name:

SMART MUG

Members that participated in the activity:

Initial & Surname	Student number	Contribution
T.M. MATIBA	31839312	LO1&4
T.J.MOGOBOYA	30173388	LO1&4
T.N.RADEBE	32092083	LO2&4
D.V.THINANE	32903936	LO2&4
T.I.NTSAYAGAE	30196817	LO3&4
L.M.TSHABALALA	31927009	LO5&4
M.P.MNQUBANE	33172897	LO5&4

1. DECISION MAKING:

Decision making is the condition under which individuals in an organisation make decisions reflect the environmental forces that individuals cannot control, but that may in the future influence the outcomes of the decisions. Decision making includes: Defining, gathering information, generating alternatives and choosing the course of an action.

Role of decision making for a manager and an employee:

In the case of employees:

As a manager, you get to see how well developed your employees are.

Different opinions are presented and this helps in terms of improvement where it is needed.

For example, if a manager needs to make a decision regarding a pitch that has to be presented to a client, he/she can see how creative his/her employees are.

In the case of a manager:

If a manager can make a good decision, this may influence staff morale.

For example if a manager took the right decision on whether to host motivational talks on entrepreneurship, this can motivate employees to work even harder.

2. The conditions of Certainty, Risk and Uncertainty under which decisions are made.

Certainty- The condition under which individuals are fully informed about a problem, alternative solutions are obvious, and the likely results of each solution are clear.

• Once an individual identifies alternative solutions and their expected results, making the decision is relatively easy: the decision maker simply chooses the solution with the best potential outcome.

• Example: if a company considers an investment of R1 000 000 in new equipment that it knows for certain will yield R400 000 in cost savings per year over the next five years, managers can calculate a before-tax return of about 40%. If managers compare this investment with one that yields only R300 000 per year in cost savings, they can confidently select the 40% return.

Risk- The condition under which individuals can define a problem, specify the probability of certain events, identity alternative solutions and state the probability of each solution leading to the desired result.

• Probability- The percentage of times that a specific outcome would occur if an individual were to make a decision many times.

• Example that is used the most is that of tossing a coin. With enough tosses of the coin, heads will show up 50% of the time and the other 50%.

• Objective probability- the likelihood that a specific outcome will occur, based on hard facts and numbers.

• Sometimes an individual can determine the likely outcome of a decision by examining past records.

• Example: Although Sanlam, old mutual and other life insurance companies cannot determine the year in which each policyholder will die, they can calculate objective probabilities that specific numbers of policyholders, in various age categories, will die in a particular year.

Subjective probability- The likelihood that a specific outcome will occur based on a personal judgment and beliefs

• Such judgments vary among individuals, depending on their on their intuition, previous experience with similar situation s expertise and personality traits.

• Example: Algorithms Inc., a leading authority on risks in business, sells application with names such as Risks Watch and Risk Mapper to banks, insurers and other firms that need assistance in measuring and managing their financial risks.

UNCERTAINITY – It is a condition under which an individual does not have the necessary information to assign probabilities to the outcomes of alternatives.

                                   Factors that affect a decision are price, production costs,

                                Volume, future interest rates.

                            *The pessimistic decision it locates the minimum payoff for each                                   possible course of action.

                             *Regret criterion – it focuses upon the regret that the decision maker might have from selecting a particular course of action ( E,G) it measures the magnitude of the loss incurred by not selecting the best alternative .

                             * Take one risk at a time when feasible

                              * Avoid emotional risk taking- for reasons based on clear, calm and rational thought.

                               * Uncertainty is present even when organizations do considerable research and planning before committing resources to certain projects that have to be done.

3. Characteristics of the types of decisions

ROUTINE DECISIONS  -These are the standard choices that are made in response to well-defined problems with the alternative solutions. -Routine decisions are made under established rules, procedures and policies. -Example of such a decision make be the shortage or nursing staff.

ADAPTIVE DECISIONS -These are decisions made when problems and alternative solutions are somehow unusual and only partially understood. -This can involve modifying past routine decisions for continuous improvement. -Example Changing working time patterns or methods of assignment.

INNOVATIVE DECISIONS -These are decision based on discovery, identification and diagnosis of unusual problem sand the development of unique and creative ways to solve them. -Solutions involve a series of small interrelated decisions made over a period of month’s even years. -

4. How goals affect decision making:

They have a positive statement in the process of decision making in the business.

They help guide in such a way that a solution picked for a certain problem does not outline the main aim of establishing the objective for the business.

5. Differentiate between the rational, bounded rationality, and political models of decision-making

RATIONAL MODELS

Is a 7 steps prescriptive model that tells how the decision should be made when making a routine decision in situations involving conditions of near certainty or low risk. It involves a series of steps that individuals or teams should follow to increase the likelihood that their decisions will be logical and sound.

7 steps of rational decision model

1. Define and diagnose a problem

Problem definition and diagnosis involves three skills that are part of managers planning and administration which are noticing, interpreting, and incorporating. Noticing involves identifying and monitoring numerous external and internal forces and deciding which ones are contributing the problem. Interpreting involves assessing the force noticed and determining which are causes of the real problem lastly incorporating involves relating those interpretations to the desired goal, if they

2. Set goals

After individuals or teams have defined a problem they now can set specific goals for eliminating their problem. Setting goals can be extremely difficult under the conditions of uncertainty they have to identify alternative goals compare and evaluate them and choose among them as best they can if the goal is stratospheric to achieve.

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3. Search for alternative solutions

Individual or team members must look for alternative ways to achieve the goal, this might include seeking for additional information, thinking creatively, consulting experts and doing research. if there’s no feasible solution the for reaching the goal they might need to modify the goal

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4. Compare and evaluate solutions

After individual have found alternative solutions they must compare and evaluate them by looking at the relative costs and effectiveness of each solution

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5. Choose from among alternative solutions

choose a solution to the problem, although choosing among alternative solutions might appear to be straightforward it may prove to be difficult if the problem is complex, ambiguous, and has high degree of risk or uncertainty

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6. Implement the solution selected

Implement the solution a solution must be accepted and supported by al responsible for implementing it, if the solution cannot be implemented another one should be considered element the solution selected

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7. Follow up and control

follow up and control implementing the solution will not only achieve the desired goal. They must be a control implementations of activities and follow ups evaluating the results

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 BOUNDED RATIONALITY MODEL

Emphasises the limitations pf rationality and explains why different individuals make different decisions when they have exactly the same information. The bounded rationality model refers to an individual’s tendencies to do the following:

• Select less than the best goal or alternative solution
• Engaged in a limited search for alternative solutions
• Have inadequate information and control over external and internal environment forces influencing the outcomes of the decision.

Satisficing 

Is a decision making strategy that aims for a satisfactory or adequate result, rather than the optimal solution. It entails searching through available alternatives until an acceptability threshold is met. An acceptable goal might be easier to identify and achieve, less controversial and safer than the best available goal. However, the achievement of quality improvement goals is often as a results of a series of satisficing decisions.

Factors influencing a satisficing decision

LIMITED SEARCH

INFORMATION-PROCESSING BIAS

 

 

INADEQUATE INFORMATION

                                                                  

 

LIMITED SEARCH

Individuals usually make only a limited search for possible goals or alternative solutions to a problem, considering options until they find one that seems adequate. Even the rational decision making model recognises that identifying and assessing alternative solutions costs time, energy and money.

Example:

INADEQUATE OR MISINTERPRETED INFORMATION

Bounded rationality also recognises that individual regularly have inadequate information about problems and that the events that are out of their control influence results of their decisions.

Example:

INFORMATION PROCESSING BIAS

Consistent with the bounded rationality model, individuals often fall prey to information processing biases when they engage in bounded rationality decision making.

The following are the five of biases:

1. Availability bias

Means that people who easily recall specific instances of an event may overestimate how frequently the event occurs.

Eg, people who have been highly intoxicated on alcohol and did bad/awkward things often think they might experience the same situation if they drink alcohol again.

2. Selective perception bias

Means that what people expect to see often is what they do see. People seek information that is consistent with their own views and downplay conflicting information.

Eg,  when you have a  blocked nose you prefer using  a snuif which is very harmful to your health as it contains cancer causing chemicals than nasal pray

3. Concrete information bias

Means that vivid direct experience usually prevails over abstract information. A person experience can outweigh statistical evidence.

Eg, if you buy a specific takeaway at a specific restaurant and find that their food is not well cooked or stale you constantly think that their food is always like that.

4. The law of small number bias

Means people may view a few incidents or cases as a representative of a larger population.

Eg, if a police officer is involved in an unethical behaviour like bribery, you going to perceive all police officers as corrupt.

5. Gambler’s fallacy bias

Means seeing an unexpected number of similar events can lead people to the belief that an event not seen can occur.

Eg, in a game of chess, if you opponent has won several times, on your next game you are likely convinced that he/she is going to win again.

POLITICAL MODEL

This model describes the decision making process in term of particular terms and goals of powerful internal and external goals. Power is the ability to influence and control individual, departmental, team, organisational, decisions and goals. Power is the ability to influence and control the following factors:

• The definition of the problem
• Choice of goal
• Consideration of alternative solutions
• Selection of the alternative to be implemented
• Action and success of the organisation

Political process are most to occur when decisions involves powerful stakeholder, disagreement in the choice of goal and people who are not searching for alternative solutions

Problem definition

External and internal try to define problems for their own advantage. when things go wrong within a politically based or orientated organisation. one or more individual may be blamed or singled out as a cause of the problem. This finger pointing is called scapegoating: casting blames or problems on an innocent or partially responsible individual, team or department. scapegoating may be used to preserve a position of power or maintain a positive image

Divergence in goals

The political model recognises the likelihood of conflicting goals among stakeholders and the choice of goals will be influenced strongly by relative power of stakeholders. In contrast the balance pf power among several stakeholders leads to negotiation and compromise in the decision making process. It is characterised by the push and pull of stakeholders who have both power and conflicting goals. Although the balance of power may lead to compromise, it may also lead to stalemate. A common political strategy is to form coalition when no person, group or organisation has power to select or implement it preferred goal.

Divergence in solution

Some goals are perceived as win or lose situation. In such a situation stakeholders often distort and withhold information selectively to further their own interest. Stakeholder within an organisation view information as a major source of power and use it accordingly. The rational decision making model ask all employees to present all relevant information openly, however employees who are operating under the political model view free disclosure as naïve, making achievement of their personal, team or departmental goal more difficult to achieve. Information has the folloeing characteristicts.

• It is piecemeal and based on informal communication
• It is subjective rather than being based on hard facts
• It is defined by what powerful stakeholders consider to be important

The political strategy to achieve a goal used by stakeholders is co-optation, this involves bringing new stakeholder representatives into the strategic decision making process as a way to avert threats to an organisation’s stability.

Example: is placing the head of department of security services on an enterprise board of directors when they want to discuss the safety of the organisation or tighten the safety in the organisation