Decision making is a process involving a series of steps. The first step is recognition of the problem; the managers realize that a decision must be made. The second step is to identify the objective of the decision which is to say what we want to achieve by it.
The third step is to gather and evaluate data relevant to the problem. The next step would be to list and evaluate courses of action.
The fifth step is to select the best alternative followed the implementation of the action chosen. But a follow up and feedback process must be put into place in order to control how well it is actually working.
Models of Decision Making
• The Rational Model
Rationality refers to a step-by-step approach to decision making. This model comes from classic economic theory and states that the decision maker is completely rational in his/her approach. The model has the following assumptions
• Outcome will be completely rational
• The decision maker has a consistent system of preferences
• He /she is aware of all the possible alternatives
• He /she can calculate the probability of success for each alternative
The decision maker always strives to optimize, meaning choosing always the best alternative.
But given its assumptions this model is unrealistic. There are time constraints and limits to what knowledge a person has, plus manager’s preferences and needs often change.
• Bounded Rationality Model
This model recognizes the deficiencies of the rational model awarding it a Nobel Prize in 1978.
The model is also referred to as the “administrative man” theory, is based on the idea that there are constraints that force a decision maker to be less than completely rational. The model has four assumptions:
• Managers select the first alternative that is satisfactory
• Managers recognize that their conception of the world is simple
• Managers are comfortable making decisions without determining all the alternatives
• Managers can make decisions by rules of thumb or heuristics (short-cuts)
Heuristic are short-cuts the managers develop to make decisions in order to save mental activity. Basically heuristics are rules of thumb that help managers make decisions based on past experiences. But heuristics can also cause error in judgment due to previous biases.
• Garbage Can Model
He decisions in this model are random and unsystematic. In the model the organization is a garbage can in which problems, solutions, alternatives and participants are random. If the 4 factors connect then a decision is made. However the quality of the decision depends on timing.
The model illustrates that decisions in an organization are not made on a step-by-step manner. Some decision may come out of luck.
Jung’s Cognitive Styles
Individuals have different styles of making decisions, that’s why Carl Jung has come up with this original theory in which he identifies two styles of information gathering (sensing and intuiting) and two judgment making styles (thinking and felling). The theory also states that subjects prefer one style of perceiving and one of judging, making the combination of the two a single cognitive style.
There are four types of cognitive styles:
• Sensing/thinking (ST): relies on facts
• Sensing/feeling (SF): gather factual information, but make judgment in terms of how they affect people
• Intuiting/thinking (NT): focus on alternative solutions and then evaluate them objectively and impersonally
• Intuiting/feeling (NF): also search for alternative possibilities but they evaluate the possibilities in terms of how it affects people.
Each of these styles affect managerial decision making.
Decisions can also be made or be affected by groups. One of the reasons for making group decisions is synergy, which occurs when group members stimulate new solutions to problems through mutual influence and encouragement. Another reason is the gain of commitment to a decision.
Although making group decision has its advantages it also has disadvantages. Some advantages are: more knowledge and information through the input of every member, increased acceptance of the decision and greater understanding of the decision.
Some disadvantages may be: pressure within the group to conform and fit in, domination of the group by one stronger member and the amount of time required, a group makes slower decisions than an individual.
When to use individuals or groups? It all depends on the type of task.
Another very important element to be considered is the ethical implications of the decision. Ethical decision making is influenced by many factors, among them individual differences and organizational rewards and punishments.
To make an ethical decision the decision maker should make himself three questions:
1. Is it legal? (Will I be violating the law or company policy?)
2. Is it balanced? (Is it fair to all the parties involved in the short and long term?)
3. How will it make me feel about myself? (Will it make me proud of my actions?)
All decisions made by individuals or groups must be evaluated by their ethics.
ETHICS AND CULTURE
A study done in the US tried to show how the culture can affect the ethical decision making of an accountant. This profession was chosen for the study given the long history of high ethical standards it has maintained. Culture, and possibly, religion have been the key variables examined as a basis for differences in an individual's ethical decisions. As more and more minorities enter the profession of accounting in the U. S., an important question that should be answered is "Will American minorities approach ethical situations similarly to their non-minority American peer group?", or "will their cultural backgrounds influence their ethical norms?”
Surveys were conducted among students. They were asked hypothetical ethical questions and scenarios and they had to respond what they would do, or how they would treat this situation. The results of the study concluded that there were almost any difference in the way both non-minority and minority groups dealt with the situation. The situation was that someone is applying for a job at a company but he lies about his resume. Dealing with ethical issues, it was found that the largest difference was in the perceptions of students to whether or not the liar is preventing a more qualified person from getting the job. The minority students felt much stronger than the non-minority students that the liar was preventing a more qualified person from getting the job. The researchers believe that minority students may be more sensitive to the difficulties of getting a professional job. The students' ethnic background also had an impact in their sense of loyalty to the university. Minority students felt a stronger sense of loyalty to the university than their non-minority counterparts. The findings suggest that minority students are more sensitive to ethical transgressions by their peers and feel more negatively impacted if someone lies in the process of getting a job.
The authors suggest diversity is essentially about cultural norms and values. Business enterprises should create an inclusive work environment. The same can be said about the classroom. The experience shows that ethnic background did not play a difference in the students' reactions to this ethical dilemma. The researchers believe the students' extensive experience in their multi-cultural education explains the results.
Nelson, D.L. & Quick, J.C. 2010. Organizational Behavior: Science, the Real World and You. South-Western College Publication, 7th. Pp. 326 - 356.
EBSCO Database. RICH, Anne J.; MIHALEK, Paul H.”In The United States Accounting Profession,Will Minorities Make Different Ethical Decisions?”. Journal of Diversity Management 2010