Initials & Surname	Student Number	Contribution
Z.R NKOSIYAPHANTSI	28364325	LO 1
K. KGOMANYANE	32171544	LO 1
S. MABELANE	30854857	LO 2
K.J. MOHAPI	32223358	LO 3
M. MAKUME	31801463	LO 4
T. CABA	31262589	LO 5

Fundamentals of decision-making

LO1 - Define decision-making and the role of decision-making for managers and employees 

Decision-making

The thought process of making a logical choice by identifying a decision, gathering information, and assessing alternative resolutions from the available options. 

Roles of Decision-making 

• For Managers: Being a good manager depends on taking responsibility as a leader, which one its duties is making decisions. Making good decisions influences morale for either god or bad. A manager’s decisions can either solve or create problems. Some days all a manager achieves is making decisions for people.
• For Employees: The solid foundation of any company is its people. Employees represent a source of knowledge and ideas. Involving employees in the decision-making process empowers them to contribute to the success of an organization, and also saves the company time and money in increased productivity and reduced outsourcing. On top of that, they gain a professional and personal stake in the organization and its overall success. This commitment leads to increased productivity as employees are actively participating in various aspects of the company and wish to see their efforts succeed overall. This is not only beneficial to company growth, but is also on-the-job training for workers. The increase in responsibility expands employee skill sets, preparing them for additional responsibility in the future.

Either a manager or employee, there are steps to be followed for sound decision-making.

 

1. Once you identify the problem, you can slip in and out of different decision-making roles as you work on it.
2. Information gathering. What exactly is the issue and how bad is it?
3. List possible solutions. Identify which options look best, which options are acceptable and which ones you don't want.
4. Identify the potential effects of the problem, and of the solutions.
5. Weigh the facts. Which of the options produces the best outcomes? Which is most likely to work?
6. Draw up a plan. Once you know the best option you have to find the right path to get there.
7. Launch. Implement the best possible solution.
8. Take follow up action.

Ways of Deciding

For a simple decision, like where the team goes for lunch, a quick show of hands may be all you need, but decisions with bigger potential impact require a better decision-making process. If you're not sure how to weigh the options, there are several ways you might consider.
Decision tree. List each option as one branch of the tree, have the options branch out into the possible outcomes, then analyze them.

Decision matrix

The matrix shows the list of options and how they interact with the various factors in play. By scoring the different possibilities, you come out with the best choice.

Cost-benefit analysis

How much will the different alternatives cost to carry out? How much will choosing them boost your bottom line afterward?

Voting

Even if you don't want to pick the winning decision by majority vote, you can weed out some of the options by asking your team members for a vote. 

DACI decision-making model 

This divides up decision-making roles between the Driver who gathers information; the approver who makes the final call; the Contributors who weigh in but don't vote; and Informing everyone who needs to know the outcome.

 

LO2 - Discuss the conditions of certainty, risk and uncertainty under which decisions are made 

Certainty

Decision-making under the condition of certainty is the exception for most middle managers, top managers and various professionals. However, first-line managers make most day-to-day decisions under conditions of certainty. 

Uncertainty

Factors that may affect a decision such as price, production costs, volume or future interest rates are difficult to analyse and predict. Managers may have to make assumptions from which to forge the decision even though it will be wrong if the assumptions are incorrect. 

Risk

Identifying alternative solutions and specifying the probability of events that all fall under a condition called risk. If one is aware of a problem then there is less risks liable to the risk taker because one must have already set up a plan to solve the problem, that is what makes it less risky. Probability is the likelihood of an event taking place. 

LO 3 - Characteristics of the types of decisions: routine, adaptive and innovative decisions

The types of problems and solutions that managers and employees deal with range from relatively common and well defined to unusual and ambiguous. There are three types of decisions, which include:
Routine decisions

•   As the name suggests, routine decisions are those that the manager make in the daily functioning of the organisation.
•  An example of this daily newspapers

Adaptive decisions

• Choices made in response to a combination of fairly unusual and uncommon problems with alternative solutions 
• Necessary for continuous improvement
• The concept of adaptive decision making is best understood as the process of effectively reacting to an alteration in a situation in the simplest terms, it refers to problem solving

Innovative decisions

•  Is an individualized, self-assessment and workshop-based methodology, which addresses the universal need of business people: have they arrived at the best decision

There are three types of innovative decisions which are:
1.    Optional innovation-decision
2.    Collective innovation-decision
3.    Authority innovation-decision

LO4 – How goals affect decision-making

•  Decision-making in businesses under the conditions of risk and uncertainty is coupled directly with goals in one of two ways:

1.  The decision-making process is triggered by a search for better ways to achieve established goals.
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 workers, employees and the organisation a sense of order, direction and meaning.
•  Setting goals is important in adoptive and innovative decision making.

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

The Rational Model 

 

Leverages objective data, logic and analysis instead of subjectivity and intuition to help solve a problem or achieve a goal.

A 7 step prescriptive model that tells how decision should be made that involve conditions of near certainly or low risk:

1. Identifying a problem or opportunity 

2. Gathering information

3. Analyzing the situation

4. Developing options 

5. Evaluating options

6. Selecting a preferred alternative

7. Acting on the decision 

Bounded rationality

Bounded rationality is the idea that rationality is limited when individuals make decisions: by the tractability of the decision problem, the cognitive limitations of the mind and the time available to make the decision.

The bounded rationality model refers to an individuals tendencies to do the following: 

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

Satisficing: 

When selecting an acceptable goal/alternative solution 

Three factors that influence a satisficing decision:

1. Limited research 

2. Inadequate information 

3. Information-processing bias 

Political Model

Political approach to decision making extends our vision in terms of understanding agency and social factors. Takes what the rational and practical models left out and posits that any organizational activity.  

Power: the ability to influence or control individual,department, team or organisational decisions or goals. 

Three factors influencing political decision-making: 

1. Stakeholders 

2. Choice of goals

3. Alternative solutions