Members that participated in the activity:

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

Definition of decision making – Collecting information, generating alternatives and deciding a course

of action.

The role of decision making for managers and employees - It is possible to demonstrate how managers and employees can systematically base various types of decisions on the nature of the problem to be solved, the possible solutions available and the degree of risk involved. A good manager depends on the 6 managerial competencies to make decisions. Conversely, decision making processes are basic to all managerial competencies. The ability of Elon Musk to envision humans landing on Mars shows 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 his vision.

2. Discuss 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. This makes both the problem and alternative solutions and it’s expected results, making the decision is relatively easy. This is the perfect condition for the middle managers, top managers and various professionals, however, first-line managers make most day-day decisions under conditions of certainty or near certainty.

 Risk

-The condition under which individuals can define a problem, specify the probability of certain events, identify alternative solutions and state the probability of each solution leading to the desired result. This means the problem and alternative solutions fall somewhere between the extremes of being relatively common and well defined and being unusual and ambiguous.

-Probability is the percentage of time that a specific outcome would occur if an individual were to make a particular decision a large number of times. A good example is the tossing of a coin.

-There are two types of probability. The first is the objective probability which is 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.

-The second is the subjective probability which is the likelihood that a specific outcome will occur, based on personal judgement and beliefs. Such judgement vary among individuals, depending on their intuition, previous experience with similar situations, expertise and personality trait. A change in the conditions under which decisions are made can alter expectations and practices. Such a change may shift the basis for judging the likelihood of an outcome from objective to subjective probability or even to uncertainty.

Uncertainty

-The condition under which an individual doesn’t have the necessary information to assign probabilities to the outcome of alternative solutions. An individual may not even be able to define the problem much less identify alternative solutions and possible outcomes. Factors that may affect a decision such as price, production costs, volume or future interest rates are difficult to analyze and predict. Managers may have to make assumptions from which to forge the decision even though it’ll be wrong if the assumptions are incorrect. Managers rely on creativity, judgement, intuition and

experience to craft a response.

3. Describe the characteristics of routine, adaptive, and innovative decisions

Routine Decisions

Standard choices made in response to well-defined problems with alternative solutions.

The way in which to make routine decisions is covered by established rules or standard procedures.

Adaptive Decisions

Choices made in response to a combination of fairly unusual and uncommon problems with alternative solutions. Often involve modifying or improving upon past routine decisions and practises. Necessary for continuous improvement.

Innovative Decisions

Choices based on the discovery, identification and diagnosis of unusual and ambiguous problems and the development of unique and creative solutions. Solutions involve a series of small, interrelated decisions made over a period of months or even years.

4. Explain how goals affect decision-making

Definition:

Decision-making: For a business to identify the most superlative way to reach a certain set out goal it is essential that goals and decision-making are amalgamated in such a way that it decision- making is a prerequisite for newly created goals, as looking for better ways to achieve goals and/or to improve already established goals is the catalyst for decision-making.

Goals

As for goals is a fundamental part of guiding employees in the right direction and giving

some meaning to the vision at hand, and in actual fact the absence of such would cause the inefficiency of the managerial competencies. And like stated above the incorporation of the two will help innovative decision-making with the aid of goal setting.

Nature of the goal:

The natural of the goals is also a important part of goals, as goals are things that want to reached or a direction one wants to go, and the nature of the goal can determine the quality and the quantity of the anticipated result.

Why people set goals:

People usually set goals to center people’s attention, decisions and efforts, and in terms of the organization it demonstrations what is expected so that everyone can understand what to do and how to do it, and work to achieve such.

General and operational goals:

This goals widens direction of decision-making in such a way that the ideology of quality

over quantity is applied.

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

Rational decision-making model

The rational model consists of a process of seven steps to be followed by people or teams to ensure the maximum achievement of the goals among the present limitations. It’s a traditional, logical approach to decision making and it is a process which is followed step by step. Firstly, the problem is diagnosed and then goals and objectives are set. During this model alternatives by which goals can be achieved must be identified and understood. The actors must be able to evaluate alternatives, while keeping the goal in mind. After evaluating, the best possible alternative must be chosen then implemented so that the goal can be reached. Alternatives and outcomes must first be weighted before making the final decision. Lastly, the solution should be controlled and feedback on the outcome should be obtained. An example when this model is used is where customers want to purchase a product that is the most useful at the cheapest price.

Bounded rationality decision-making model

This model highlights the limitations of the rational model and showcases the day-to-day decisions made by people. The reason why different decisions are made by different people is also explained. The bounded rationality model is a practical process used and it is also more realistic, because human and environmental realities are considered. There are a lot of limitations when it comes to the bounded rationality model, such as the difficulty to recognize alternatives that can be followed, because of human cognitive constraints, and decisions must always be made for the future and the future involves a lot of uncertainties. It refers to the human tendency to satisfice, conduct limited searches for alternatives and having misinterpreted or inadequate information regarding external and internal environmental forces. Individuals often experience availability bias, selective perception bias, concrete information bias, law of small numbers bias and gambler’s fallacy bias. An example may involve a consumer only visiting 10 shoe shops near him/her to find a pair of shoes instead of all of them in the country, stopping the search once an acceptable pair has been found.

Political decision-making model

This model entails decisions made in terms of goals or interests of internal or external

stakeholders with power. It takes into account what the rational and bounded rationality

models have left out. This model assumes that people bring preconceived notions and

biases into the decision-making situation. Factors that affect this model are powerful

stakeholders, disagreement over choice of goals and no search for alternative solutions. Individuals with power influence the definition of the problem at hand, activities of the firm, consideration of the goal and choice of alternatives with the implementation thereof. This model relays the self-interests of individuals and their pursuit of short-term goals, often leading to unethical behavior. Along with divergence in goals and solutions, co- optation is a common political strategy in this model, whereby, for example, a banker is elected as a member on a firm’s board of directors when it needs to borrow money.