FUNDAMENTALS OF DECISION-MAKING

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

Decision-making is the act or process of deciding something especially with a group of people. Decision-making in management is an essential skill required for the organisation to succeed.

Role of decision making for:

MANAGERS

• Better utilization of resources
• Facing problems and challenges
• Business growth
• Achieving objectives
• Increases efficiency
• Facilitate innovation
• Motivates employees

Employees

• Improves morale
• More inputs
• Create teamwork
• More responsibility

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

1. Certainty is the condition under which individuals are fully informed about a problem, solutions are clear and results of each solution is clear. Certainty allows us to have control over every situation because we would be well informed about the problem and all solutions. Being well informed about a problem insures that decisions can be made easily in order to solve the problem.
2. Risk is the condition under which individuals define a problem, specify the probability of events and identify alternative solutions. The more one is well informed about a problem the less the risk is involved, because one will know how to solve every situation which might be risky. Probability s the likelihood or chance of an event occurring. Objective probability is based on statistics, experiments and research while subjective probability is derived from a persons personal judgement or experience about it an outcome is likely to occur.
3. Uncertainty is the condition were a person does not have the necessary information to assign probability to an outcome. The person may not be able to come up with solutions because they are not informed on the problem itself. Uncertainty may be caused by ambiguous or  highly unusual problem.

LO3- Describe the characteristics of routine, adaptive and innovative decisions

• Routine decisions= These are standard choices made in response to relatively well-defined and common problems with alternative solutions. Standard operating procedures or rules are established to assist with how to deal with the problem. The routine decisions are usually made by a computer software for example university registration and calculation of APS score.
• Adaptive decisions= Choices made in response to a combination of moderately unusual and fairly uncommon problems with alternative solutions. These involve the improvement and modification of past routine decisions and practices. Continuous improvement is a key to total quality management. This improvement requires a commitment to constant diagnosis of the technology, organization as well as the managerial process. Decisions  based on continuous improvement are made based on the drive to provide better quality improving efficiency and being responsive to customers.
• Innovative decisions= Based on the discovery, identification and diagnosis of unusual and ambiguous problems and the development of unique or creative alternative solutions.

 LO4- Explain how goals affect decision making

Goals are crucial in giving employees and managers a source of order, direction and meaning. Goals are results to be attained thus indicate the directions in which decisions and actions should be aimed.

1. goals aid the planning process.
2. Goals motivate people to perform better.

Crucial goals provide broad direction for decision making in qualitive terms. Operational goals state what is to be achieved in quantitive terms, for whom within the period.

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

1. Rational model describes the number of steps that individual and teams must follow. It consists of a series of steps, starting with problem identification and ending with the implementation of the solutions.
2. Bounded rationality is concept proposed by Herbert Simon which emphasizes limitations of rationality. Bounded rationality explains why different people make different decisions even though they have the exact same information. Human beings tend to always choose less than the best goal and this is known as satisficing which is the basis of the concept of bounded rationality.
3. Political models grasp these hypothesis that portray basic leadership as a bargaining procedure. Investigation centers around the distribution of intensity and impact in associations and on the bargaining and negotiations between interest groups.