After reading this article you will learn about Decision-Making:- 1. Meaning of Decision Making 2. Significance of Decision-Making 3. Limitations of Decision-Making 4. Systems Approach to Decision-Making 5. Group Decision-Making.
Contents:
- Meaning of Decision-Making
- Significance of Decision-Making
- Limitations of Decision-Making
- Systems Approach to Decision-Making
- Group Decision-Making
1. Meaning of Decision-Making:
Decision-making describes the process by which a course of action is selected as the way to deal with a specific problem. People at all levels in an organization are constantly making decisions and solving problems. For managers, the decision-making and problem-solving tasks are particularly important aspects of their jobs.
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Which employee should be assigned a particular task? How should profits be invested? Whether the problem is large or small, it is usually the manager who has to confront it and decide what action to take. Managers make decisions dealing with both problems and opportunities. For instance, making decisions about how to cut costs by five percent reflects a problem.
The manager also has to make decisions when there is an opportunity that can be exploited. If the firm has surplus funds, the manager has to decide whether the extra funds should be used to increase shareholder dividends, reinvested in current operations, or to expand into new markets.
The quality of managers’ decisions is the yardstick of their effectiveness and value to the organization. Managers are usually evaluated and rewarded on the basis of the importance and results of their decisions. This indicates that managers must necessarily develop decision-making skills.
2. Significance of Decision-Making:
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i. Managers who use a rational, intelligent, and systematic approach are more likely to come up with high quality solutions to the problems they face than the ones who do not use this approach.
ii. Rational decision-makers have a clear understanding of alternative courses of action to accomplish a goal under a particular set of circumstances.
iii. Rational decision-making is based on the information available with the decision-makers and their ability to evaluate alternatives.
iv. Rational decision-making aims at deciding the best solution by selecting the alternative that most effectively facilitates goal achievement
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3. Limitations of Decision-Making:
i. It is very difficult for managers to be completely rational in their decision-making since decisions are taken keeping the future in mind, and the future is very uncertain.
ii. It is very difficult to determine all the alternative courses of action that might be followed to accomplish a goal.
iii. Rational decision-making becomes almost an impossible task when one has to explore areas which have never been ventured into before.
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iv. In most cases, all possible alternatives generated cannot be thoroughly analyzed, even with sophisticated analytical techniques and computers.
v. Even though the decision-maker strives to be completely rational, sometimes limitations of information, time and certainty, curb rationality.
vi. Sometimes, managers allow their risk-avoiding tendency to disrupt their rational decision-making process.
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4. Systems Approach to Decision-Making:
Many elements of the planning environment extend beyond the boundaries of an enterprise. Hence, it is not possible to make decisions in a closed-system environment. Moreover, since each department or unit of an enterprise is a subsystem of the entire enterprise, managers of the organizational units must be responsive to the policies and programs of other organizational units and of the whole enterprise.
When a manager makes a decision, he has to take into account the thinking and attitudes of others within the enterprise, as they are also a part of the system.
Even in a closed-system model, a manager has to make several assumptions regarding the environmental forces that influence the organization. However, while taking into account the various elements, the manager does not give up his role as decision-maker. It is not advisable to make the decision process unnecessarily democratic.
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Subordinates or others may have an immediate or remote interest in any decision to be taken. The manager must decide which, if any, of his subordinates he needs to consult in respect of any issue. The manager is the decision-maker who must select a course of action from among the alternatives, taking into accounts the events and forces in the environment.
5. Group Decision-Making:
In many major organizations, decisions are often made by groups rather than by individuals. Group decision-making is practiced in many large and complex organizations. Many studies have shown that groups make better decisions than individuals.
As the old adage goes, “Two heads are better than one”. A major reason why group decision-making is more effective than decision-making by individuals is that more information is available in a group setting. In group decision-making, several individual members contribute their ideas before a decision is made.
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The group has more information and a greater number of alternatives available to it. Another major strength of group decision-making is the relative ease of implementing decisions. The people involved in a group decision understand the rationale behind it, are more likely to accept it and are capable of communicating the decision to their work groups or departments.
Despite its advantages, group decision-making also has several potential disadvantages compared with individual decision-making. One of the major disadvantages of group decision-making is that it is a time-consuming process. Moreover, group decisions are often a compromise between the differing opinions of individual members rather than an appropriate solution to the problem.
There is often pressure to accept the decision favored by a majority of the group members. It is also possible that differences in status or rank, or personality, result in one or more individuals dominating the group. A final disadvantage is that the group may succumb to a phenomenon known as groupthink.
This is the tendency exhibited in cohesive groups to seek approval on an issue at the expense of a realistic appraisal of the situation. The group members are so focused on preserving the cohesiveness of the group that they may not raise topics which bring to the fore differences of opinion.
In order to avoid conflict between group members, the group may arrive at decisions that are not in the best interests of either the group or the organization.
The group has more information and a greater number of alternatives available to it. Another major strength of group decision-making is the relative ease of implementing decisions. The people involved in a group decision understand the rationale behind it, are more likely to accept it and are capable of communicating the decision to their work groups or departments.
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Despite its advantages, group decision-making also has several potential disadvantages compared with individual decision-making. One of the major disadvantages of group decision-making is that it is a time-consuming process. Moreover, group decisions are often a compromise between the differing opinions of individual members rather than an appropriate solution to the problem.
There is often pressure to accept the decision favored by a majority of the group members. It is also possible that differences in status or rank, or personality, result in one or more individuals dominating the group. A final disadvantage is that the group may succumb to a phenomenon known as groupthink.
This is the tendency exhibited in cohesive groups to seek approval on an issue at the expense of a realistic appraisal of the situation. The group members are so focused on preserving the cohesiveness of the group that they may not raise topics which bring to the fore differences of opinion.
In order to avoid conflict between group members, the group may arrive at decisions that are not in the best interests of either the group or the organization.
Advantages and Disadvantages of Group-Aided Decision-Making and Problem Solving:
Advantages:
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a. Greater pool of knowledge:
A group can bring much more information and experience to bear on a decision or problem than can an individual acting alone.
b. Different perspectives:
Individuals with varied experience and interests help the group see decision situations and problems from different angles.
c. Greater comprehension:
Those who personally experience the give- and-take of group discussion about alternative courses of action tend to understand the rationale behind the final decision.
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d. Increased acceptance:
Those who play an active role in group decision-making and problem solving tend to view the outcome as “ours” rather than “theirs”.
e.Training Ground:
Less experienced participants in group action learn how to cope with group dynamics by actually being involved.
Disadvantages:
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a. Social pressure:
Unwillingness to “rock the boat” and pressure to conform may combine to stifle the creativity of individual contributors.
b. Domination by a vocal few:
Sometimes the quality of group action is reduced when the group gives in to those who talk the loudest and longest.
c. Logrolling:
Political wheeling and dealing can displace sound thinking when an individual’s pet project or vested interest is at stake.
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d. Goal displacement:
Sometimes secondary considerations such as winning an argument, making a point, or getting back at a rival displace the primary task of making a sound decision or solving a problem.
e. Groupthink:
Sometimes cohesive in groups let the desire for unanimity override sound judgement when generating and evaluating alternative course of action.
Forms of Group Decision-making:
The most common forms of group decision-making are: interacting groups, Delphi groups, and nominal groups.
Interacting Groups:
One of the most common forms of group decision-making is an interacting group. It is a decision-making group in which the members openly discuss, argue about and agree on the best alternative.
In this form of group decision-making, an existing group (like a functional department, regular work group, or standing committee) or a newly designated group (such as an ad hoc committee, task force, or work team) is entrusted with the task of taking a decision.
The discussion is open and interactive, with group members “free-wheeling” ideas that lead to an accumulation of pooled information and value judgments. The group arrives at a decision after discussing the pros and cons of various alternatives.
An advantage of this method is that the interaction between people brings forth many new ideas and improves understanding between members of the group. However, a major disadvantage of this form of group decision-making is that political factors can influence it to a great extent. It fosters group dynamics that tend to limit the creative process.
Delphi Groups:
This form of group decision-making involves obtaining the opinions of experts and developing a consensus. This technique was originally developed by the Rand Corporation. It uses the individual views and opinions of a panel of experts.
Their opinions are combined and averaged. Since the Delphi technique does not bring the participants together, most of the inhibiting factors of group dynamics are eliminated and anonymous participation is facilitated.
The Basic Steps and Concerns of Delphi Method:
According to Adler and Zigiio, the Delphi method is a method of group communication among a panel of geographically dispersed experts.
This method allows experts to deal with a complicated task in a systematic manner. The Delphi method tries to overcome the limitations of a conventional face-to-face interaction.
In the Delphi method, the most important elements are (1; presenting the information in a structured manner (2) providing feedback to the participants and (3) ensuring anonymity of participants.
As described by Fowles, the Delphi method comprises of the following ten steps:
a. Creation of a team to undertake, and monitor a Delphi study.
b. Selection of panelists (who are experts in their domain) to participate in this exercise.
c. Developing the first round of Delphi questionnaire.
d. Testing the questionnaire to sec that there are no ambiguities or vagueness in the terms used.
e. Transmission of the first questionnaire to the panelists.
f. Analysis of the responses of the first round.
g. Preparing and testing the questionnaire for the second round.
h. Transmission of the second questionnaire to the panelists.
i. Analyzing the second round of responses (steps 7 to 9 are repeated as desired to get correct results).
j. A report is prepared by the analysis team to present the conclusions of the exercise.
The Delphi method has been criticized by several management writers.
The major concerns about the Delphi method are:
(i) Discounting the future – Present events are often considered more important than the future and the past happenings. Therefore, there is a tendency to discount or undermine future events.
(ii) The simplification urge – Sometimes, the experts project the future in terms of their own specializations. They may not find it easy to develop a holistic view of the future. Hence, the pervasive influence of change may be underestimated,
(iii) Illusory expertise – Some experts may not be able to forecast future trends. Such an expert’s view must not be mistaken as the most appropriate.
(iv) Sloppy execution – The Delphi process may occasionally lose its focus and this can result in a poor job.
(v) Format bias – In some cases, the format of the questionnaire may not be appropriate for some participants.
(vi) Manipulation – The responses can be manipulated by those monitoring the process in order to move the next round of responses in a desired direction.
In general, many management writers are of the opinion that Delphi method is useful for those questions which are specific and single-dimensional. However, this method fails when the forecast is complex and deals with multiple factors. Thus, a Delphi study helps find suitable answers to specific questions.
The first step in the Delphi technique is to bring together a panel of experts. Next, a problem is presented to them and they are asked to give their (anonymous) solutions to the problem.
Strengths and Weaknesses of Delphi Method:
The main strength of Delphi method is that it allows a manager to explore issues on which decisions have to be made in an objective manner. The Delphi method is a powerful technique which can give useful answers to specific and appropriate questions.
Nevertheless, the Delphi method has a number of weaknesses too. Firstly, it is difficult to conduct Delphi studies well. A lot of thought and consideration must go into the choice of the people who are to participate. The questionnaire too has to be prepared with great care so as to avoid confusion. A second drawback of the Delphi method is that it takes a considerable amount of time.
A single round can easily take three weeks; therefore, the Delphi method cannot be used in cases where time is a constraint. Finally, some management theorists are of the opinion that Delphi method does not really produce accurate answer?
They feel that the participants with extreme opinions are more likely to change their stand, rather than elaborate the reasons behind their choice. Also, since expert consensus is usually regarded as more likely to be correct than a forecast made by an individual, too much emphasis is placed on obtaining consensus. Thus, Delphi method discriminates against extreme opinions.
In spite of its pitfalls, the Delphi method is a systematic way of organizing the views of experts, it brings together the expertise all me participants in a particular domain. The Delphi method is still considered as one of the best ways to collect and synthesize opinions.
The responses are collected and averaged by the people coordinating the Delphi group. They then ask the experts for some more alternatives or solutions to the problem. At this juncture, the experts who contribute unusual solutions may be asked to explain or clarify them further. These explanations are sometimes conveyed to other experts.
The process of collecting the responses from experts and asking them to give more alternatives is repeated a number of times in order to achieve in-depth consensus. When there is a relative stability in the responses given by the participants, the average response or solution is taken to represent the decision of the “group” of experts.
The Delphi technique is not used for routine, everyday decisions because it is time-consuming and expensive.
Nominal Groups:
This is another useful group decision-making technique, which is used occasionally. In a nominal group technique, the group members are actually brought together, whereas in the Delphi method, the participants do not meet. However, nominal group members do not interact as freely as the members of interacting groups. This technique is generally used when creative or innovative ideas are required.
Advantages and Disadvantages of Nominal Group Process:
A nominal group process is a structured problem-solving technique in which individuals and the ideas generated by them are brought together in a face-to-race, group situation. Nominal group processes are used in the field of health services, social services and education. This technique is also used in industry and government agencies to enhance creative participation in group problem-solving.
Advantages:
a. If the nominal group process is well-organized, a definite conclusion can be arrived at from a heterogeneous group.
b. This process can be used to elaborate upon the data obtained from surveys or-existing documents. It can also be used to produce a more specific survey.
c. The process motivates all the participants to get involved in the process and contribute their ideas.
d. A nominal group process produces many ideas in a short spar, of time. It takes into account individual thoughts and concerns.
e. Allows people of different backgrounds and experience to give their inputs.
f. Provides equal opportunity for all participants to express opinions and ideas without any confrontations.
g. Promotes creative thinking and effective communication.
h. Allows participants to express their ideas in a clear manner.
Disadvantages:
a. Since this process involves face-to-face interactions, it requires a skilled group facilitator.
b. It is very hard to carry the process out with a large group. For a large group, the facilitator has to prepare in advance and the participants have to be divided iiito smaller groups of 6-10 members.
c. The facilitator or group leader must be flexible and should respect the views expressed by others. Otherwise, the process may become very rigid.
d. Inadequate discussion may cause ambiguity and overlapping of ideas.
e. Individuals who are selected to participate in the process may not represent all the subgroups of the community. Some sub-groups may not be represented at all. Therefore, the ideas generated in a nominal group process may not portray the concerns of the entire community.
f. People who are aggressive may not allow others to participate or to express their views fully. In order to avoid such a situation, the group facilitator must be tactful and give all participants a fair chance.
g. A nominal group process may not be a sufficient source of data in itself. This process may require a follow-up survey, observations or documentary analysis.
h. This process is not suitable for routine meetings, negotiations and collective bargaining
The nominal group technique begins with the managers assembling a group of knowledgeable people and outlining the problem to them. The group members are asked to list out the possible solutions to the problem. The members then present their ideas. These are then recorded (on a flip chart or blackboard) in full view of the group. Discussion in the initial stages pertains to clarification of doubts.
When all the responses are recorded on the master list, the group members discuss and evaluate the ideas openly. Group members then rank the various alternatives and decide on the best alternative. The alternative that secures the highest rank represents the decision of the group. However, it is up-to the manager to accept or reject the group decision.