Managers play many roles in the organization that they work in depending on the situation. They may have to appear at community functions as representative of their organization, find and provide relevant information to appropriate members of their group, communicate with individuals outside their organization, cope with conflicts and resolve problems, determines how to allocate resources, negotiate for resources, and the lists goes on and on.
In all the roles that they play, it is almost certain that managers have to make decisions to choose the most suitable alternatives for their organization. The decision they make can have a critical impact on the organization. Making the wrong decision could have negative effects on the organization such as loss of profit, reputation and precious time.
There are several conditions in decision making which is decisions under risk condition, uncertainty, ambiguous and certainty. The following article from citeman.com discusses at length the conditions of decision making. Happy reading!!!
Decisions
by
on November 9, 2011One primary difference between programmed and non-programmed decisions relates to the degree of certainty or uncertainty that managers deal with in making the decision. In a perfect world, managers would have all the information necessary for making decisions. In reality, however some decisions will fail to solve the problem or attain the desired outcome. Managers try to obtain information about decision alternatives that will reduce decision uncertainty. Every decision situation can be organized on a scale according to the availability of information and the possibility of failure. The four positions are certainty risk, uncertainty and ambiguity. Whereas programmed decisions can be made in situations involving certainty many situations that managers deal with every day involve at least some degree of uncertainty and require non-programmed decision making.
Certainty means that all
the information the decision maker needs is fully available. Managers have
information on operating conditions, resource costs or constraints, and each
course of action and possible outcome. For example, if a company considers a Rs
1,000,000 investment in new equipment that it knows for certain will yield Rs
4,000 in cost savings per year over the next five years, managers can calculate
a before tax rate of return of about 40 per cent. However, few decisions are
certain in the real world. Most contain risk or uncertainty.
Risk means that a
decision has clear cut goals and that good information is available but the
future outcomes associated with each alternative are subject to chance.
However, enough information is available to allow the probability of a
successful outcome for each alternative to be estimated. Statistical analysis
might be used to calculate the probabilities of success or failure. The measure
of risk captures the possibility that future events will tender the alternative
unsuccessful. For example, to make restaurant location decisions, a restaurant
chain can analyse potential customer demographics, traffic patterns, supply
logistics, and the local competition and come up with reasonably good forecasts
of how successful a restaurant will be in each possible location. General
Electric Aircraft Engines (GEAE) took a risk on the development of regional jet
engines, the engines that power smaller planes with seating for up to 100 and
ranges of up to 1,500 miles. Based on trends in the environment GEAE’s managers
predicted that use of regional jets would grow, so they invested more than $1
billion in new engine technology at a time when no one else was paying
attention to the regional jet market. The decision paid off as full service
carriers have declined and smaller regional and low fare airlines have grown.
GEAC finds itself in an enviable position, with a virtual lock on one of the
few growing market segments in commercial aviation.
Uncertainty means that
managers know which goals they wish to achieve, but information about
alternatives and future events is incomplete. Managers do not have enough
information to be clear about alternatives or to estimate their risk. 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. Managers may have to come up with creative
approaches to alternatives and use personal judgement to determine which
alternative is best.
Many decisions made under
uncertainty do not produce the desired results, but managers face uncertainty
every day. They find creative ways to cope with uncertainty in order to make
more effective decisions.
Ambiguity is by far the
most difficult decision situation. Ambiguity means that the goals to be
achieved or the problem to be solved is unclear, alternatives are difficult to
define, and information about outcomes is unavailable. Ambiguity is what
students would feel if an instructor created student groups, told each group to
complete a project but gave the groups no topic, direction, or guidelines
whatsoever. Ambiguity has been called a wicked decision problem. Managers have
a difficult time coming to grips with the issues. Wicked problems are
associated with manager conflicts over goals and decision alternatives rapidly,
changing circumstances, fuzzy information and unclear linkages among decision
elements. Sometimes managers will come up with a solution only to realize that
they hadn’t clearly defined the real problem to begin with. Information was
fuzzy and fast changing and managers were in conflict over how to handle the
problem. Neither side has dealt with this decision situation very effectively,
and the reputations of both companies have suffered as a result. Fortunately,
most decisions are not characterized by ambiguity. But when they are, managers
must conjure up goals and develop reasonable scenarios for decision
alternatives in the absence of information.
