BMAN121 – Introduction to business management.

Class activity: blogging.

Chapter 14: fundamentals of decision-making.

Learning outcome 1: Decision making and the roles of decision making on employees and managers

Decision-making is the process of making important decisions and making choices by identifying a decision, gathering information and accessing alternative solutions. 

The role of decision-making for employees and managers: 

• It enhances creativity among employees. 
• Improves team work and working relations between workers and employees. 
• Decision making helps allocate tasks to employees.
• It is effective for reaching goals efficiently time. 
• Final decisions of a manager affect all employees.

Learning outcome 2: explanation of conditions of certainty, risk and uncertainty under which decisions are made.

 Certainty – condition under which individuals are notified about a problem, alternative solutions are obvious and likely results of each solution are known and defined. It is the most middle managers, top managers and various professionals.

Risk- condition under which individuals can define a problem, specify the probability of certain events, identify alternative solutions leading to desired result.

Types of probabilities

Subjective probability – likelihood that a specific outcome will occur, based on personal judgement and beliefs.

Objective probability – likelihood that a specific outcome will occur based on hard facts and numbers.

Uncertainty – condition under which an individual does the necessary information to assign probabilities to the outcomes of alternative solutions. It suggests that the problem and alternative solutions are both ambiguous and highly unusual.

Learning outcome 3: Characteristics of adaptive, innovative and routine decisions.

Adaptive decisions

The choice made to retaliate towards unfamiliar problems with alternative solutions.

These decisions involve the improvements on the routine decisions.

Routine decisions

• Routine decisions have short-term involvement
• . In this decision, people are more experienced and have excellent judgemental skills as it is needed.
• It is apprehensive with the problems that occur continuously and has a routine to solve them.

Innovative decisions

• Choices are based on the discovery and unknown problems with the solutions that are innovative and creative.
• It takes months or even years for the solution to be implemented.

Learning outcome 4: explanation of how goals affect decision-making.

Nature of goals

The main reason for origin of a goal must be clear as its nature will be a guide to the decisions that follow. Being specific about the goals will serve purpose for example: if a business creates a goal of making profit for foreseeable future, the decision based on this goal is to ensure that productivity must be carried out at a high level.

Why people set goals. 

The reason goals are set also affects decision-making due to the benefits that one will get when the goal is reached. This also builds the passion put into the achievement of that goal and high expectations helps reach better results. 

General and departmental goals: broad direction for the decision-making in qualitative terms. 

General goals affect decisions based on the direction that the business will take in achieving the business objectives, while Operational goals affects the decisions on how the productivity will be conducted.

Learning outcome 5: compare and contrast the rational, bounded political models of decision-making.

1. Rational model – process for making sound decisions in policy making in the public sector.

Individual or teams rarely follow these seven steps when making adaptive innovative decisions.

• Step 1: define and diagnose the problem.
• Step 2: set goals.
• Step 3: search for alternative solutions.
• Step 4: compare and evaluate alternative solutions.
• Step 5:  choose among alternative solutions.
• Step 6: implement the solution selected.
• Step 7: follow-up and control.

2. Bounded rationality model – the idea within the decision-making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount time they have to make a decision.

Refers to an individual’s tendencies to do the following:

• Most consumers and businesses do not have the sufficient information to make full-informed judgements when making their decisions.
• The increasing complexity of products also make life difficult.
• Bounded rationality suggests that consumers and businesses opt to satisfice than maximise. Example of bounded can be found in game strategy, management science, administration.

Political model – describes the decision-making process in terms of the particular interests and goals of powerful extend and internal stakeholders.

3. Political model – describes the decision-making process in terms of the particular interests and goals of powerful external and internal stakeholders. It involves power. Powerful and external stakeholders have the influential ability to control and lead the team to reach its organisational goals.

A person who has power must have the ability to lead and compose conceptual skills in order to define problems and choose methods and actions that will lead to the success of the organisation.

Political decision-making process is associated with factors such as stakeholders, choice of goals and alternative solutions.