STUDY UNIT 5

1.DECISION-MAKING AND THE ROLE OF DECISION-MAKING FOR MANAGERS AND EMPLOYEES.

DECISION-MAKING-is the process or action that entails making important decisions.

• The role of decision making for managers includes certain tasks such as defining the problem, establishing goals, identifying the resources, considering the alternatives, making a decision, implementing the decision and evaluating the results.
• Role of employees for employees gives each employee the opportunity to voice their opinions and to share their knowledge with others. it also encourages a strong sense of team work among workers.

2.THE CONDITIONS OF CERTAINTY, RISK AND UNCERTAINTY UNDER WHICH DECISIONS ARE MADE.

• Certainty- refers to how the decision maker/manager has full and needed information to make a decision. in most cases the solutions have been used before from previous experiences.
• Risk- provides probabilities regarding expected results for decision- making alternatives. managers come across such conditions more often in reality compared to conditions under certainty.
• Uncertainty- provides no or incomplete information. the manager cannot even assign subjective probabilities to the likely outcomes of alternatives.

3.THE CHARACTERISTICS OF ROUTINE, ADAPTIVE AND INNOVATIVE DECISIONS.

• Routine decisions- are standards choices made in response to relatively well-defined and common problems with alternative solutions.
• Adaptive decisions-  are choices made in response to a combination of moderately unusual and fairly uncommon problems with alternatives solutions.
• Innovative decisions- are choices based on the discovery, identification and diagnosis of unusual and ambiguous problems and/or the development of unique or creative alternative solutions.

4. HOW GOALS AFFECT DECISION MAKING

Goals are results to be attained and thus indicate the direction in which decisions and actions should be aimed, while decision-making is the process of providing appropriate solutions to most situations in life. the importance of decision-making is that it helps on goal setting whilst the importance of goal setting is that it provides a guide for decision making.goals can affect the decision-making process negatively or positively, for example politicians tend to specialize in decisions, so basically if you set relatively high goals it usually comes with riskier decisions based on avoiding negative consequences.

5. THE RATIONAL, BOUNDED RATIONALITY AND POLITICAL MODELS OF DECISION-MAKING.

RATIONAL MODEL

• This type of model has a series of steps that should be followed by individuals or teams to increase the chances of their decisions being logical and sound.
  • This rational decision making model consists of seven-step process namely:

1.DEFINE AND DIAGNOSE THE PROBLEM- At this stage managers, teams or individual employees should notice the internal and external environmental forces that may be contributing to the problem.They should also be able to interpret the forces that were noticed and determine which are causes of the problems. Lastly they should be able to incorporate which involves relating the interpretations to the desired goals.

2.SET GOALS- After defining the problem teams or individuals can set goals for eliminating it e.g: A certain company sales are dropping after identifying that the sales drop is the problem they have to set goals that will help eliminate the problem and rise the sales such as setting a target increase percentage they would like to achieve.

3. SEARCH FOR ALTERNATIVE SOLUTIONS- At this step teams or individuals have to be creative to find solutions to the problem,consult expects or even conduct a research e.g they could choose to try attracting more customers with incentives or move their business to a new place or introduce a new product together with the old one to attract more customers.

4. COMPARE AND EVALUATE ALTERNATIVE SOLUTIONS- After identifying possible solutions they must compare and evaluate them to be able to see which one is more cost effective.

5.CHOOSE FROM AMONG ALTERNATIVE SOLUTIONS- Choose the best suited solution that will not cost the business more than it will make it gain meaning the solution should be cost effective.

6.IMPLEMENT  THE SOLUTION SELECTED- Put the selected solution into action it does not mean that the selected solution will work if it does not work another solution can be selected. 
 
7.FOLLOW-UP AND CONTROL- After the implementation of the solution a follow-up will have to take place to evaluate the results of the strategy. 

BOUNDED RATIONALITY MODEL 

The bounded rationality model refers to an individual’s tendencies to do the following:

1.Select less than the best goal or alternative solution

2.Engage in a limited search for alternative solutions

3.Have inadequate information and control over internal and external environment forces influencing the outcomes of decisions

• The practice of selecting an acceptable goal or alternative solution is called satisficing which consists of factors namely

1.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.

2.INADEQUATE OR MISINTERPRETED INFORMATION- Individuals do not always have adequate information about problems they encounter and events that cannot be controlled by them will influence the results of their decisions.

3.INFORMATION-PROCESSING BIASES- Individuals tend to be victims of information-processing biases when they engage in this model of decision making.There are five biases namely:

1.Availability bias

2.Selective perception bias

3.Law of small numbers bias

4.Concrete information bias

5.Gambler’s fallacy bias

POLITICAL MODEL

• The political model describes the decision-making process in terms of the particular interests and goals of powerful external and internal stakeholders.

FACTORS OF POLITICAL MODEL:

1.PROBLEM DEFINITION- External and internal stakeholders try to define problems for their own advantage.One or more individuals may be singled out as the cause of problem when things go wrong in a politically biased or oriented organization.

2.DIVERGENCE IN GOALS- The political model recognizes the chances of conflicting goals among stakeholders and the choice of goals will be influenced strongly by the relative power of stakeholders.

3.DIVERGENCE IN SOLUTIONS- This factor discusses the win-lose situation  and further explains that stakeholders often keep to themselves information in order to further their own interests.

Members that participated in the activity: