Decision Making

Decision-making is every manager’s primary responsibility. It is also a process affected by the organization’s needs and characteristics. The manager’s decisions are determined by his personal skills and abilities, and also by the resources and constraints that organizations provide.

Collectively, the decision of manager gives form and directive to the work an organization does.
Viewing decision-making solely as a choice among alternatives is too simplistic, although some minor decisions may be made in this way, complex decisions are not unique, isolated events; they reflect prior behavior and anticipated consequences. Focusing only on the moment of choice among alternatives, according to Simon, leads to a false concept of decision, and “ ignores the whole lengthy, complex process of exploring and analyzing that precedes the final moment”.

The process nature of decision-making reveals the influence of time:

• The past, in which problems develop, information accumulates, and the need for a decision is perceived
• The present, in which alternatives are found and the choice is made; andThe future, in which decisions are carried out, evaluated, or changed.
• The future, in which decisions are carried out, evaluated, or changed.

Moreover major decisions involve a series of related and increasingly detailed decisions as time unfolds and consequences appear.

The fact that decision-making is a process is frequently obscured by the sudden appearance that some decisions seem to make. The forces behind a particular decision are often hidden or unknown. For strategic reasons, managers may reveal decisions only after a great deal of planning. For example, a company president who decides to close a plant in one location and build another in some other location may not announce the decision until after planners have at least partially dealt with the anticipated consequences, such as employee reactions. Critical decisions require months of planning, fact gathering, and analysis. But even in the snap decisions, in which the manager responds to an urgent stimulus, background conditions have influenced the mental processes that are involved. The urgency has merely altered the timings.

The Problem

Let us take a real life example and then find out different alternative solutions for this problem.
It has been observed that after the turnaround led by Lee Iacocca, Chrysler found itself with greater demand for cars in both America and European markets than it could provide. This was a daunting task and requires some serious thinking by the senior executives to find a best way out.

The senior executives follow the basic techniques of decision-making like:

Diagnosis and Analysis of Causes

It is the step in the decision making process in which managers analyze underlying casual factors associated with the decision solution.

In this process manager asks several questions to specify underlying causes, including:

• What is the state of dis-equilibrium affecting us?
• When did it occur?
• Where did it occur?
• How did it occur?
• To whom did it occur?
• What is the urgency of the problem?
• What is the interconnectedness of events?What results came from which activity?

Such questions help specify what actually happened and why. Executives of Chrysler asked such questions in order to find an alternative of their problem.
Perception and definition of a problem are necessary but not sufficient conditions for effective decisions. Actions can follow only when there is sufficient consensus that a problem exists and should be dealt with. Managers need an understanding of the norms or standards that govern the selection and definition of problems. in some cases, norms are specific.

Development of Alternatives

Once the problem or opportunity has been recognized and analyzed, the executives of Chrysler began to consider taking action. The next stage is to generate possible alternative solutions that would respond to the needs of the situation and correct the underlying causes.
A human being who has the ability to learn, to imagine, to remember, and to organize complexity is highly rational. By rational analysis, managers may choose among alternative decisions according to purpose. Purpose provides a rational standard against which to compare results.
Some decisions can be evaluated by objective criteria; others must be judged by qualitative standards. A dilemma in the evaluation of decisions is whether to measure a decision by its outcomes, or to assess the process by which it is made. Focusing on outcomes is a common practice, it is an easy method, because one can reduce the problem to a single criterion: if I like it, it is good. This allows for considerable subjectivity, especially in the absence of objection or criticisms from others. Evaluation processes differ for various types of decisions and decision situations, and by focusing on processes the manager can take steps to improve the quality of whole classes of decisions.

The first Alternative

The first alternative was to build new plants. But this alternative was not feasible enough because if Chrysler built new plants, it might get stuck with high overhead and excess capacity and thus the whole plan would fail. So this alternative was not a feasible solution of the problem.

Second Alternative

The second solution of the problem was to have employees work nights and weekends in existing plants. This alternative, after further consideration proved a failure because current plant was working full tilt, and hence additional labor hours would not produce many additional cars.

Third Alternative

The third alternative was to rent additional production capacity on a temporary basis. This alternative is the best and presented a creative solution of the problem as it presented the most appropriate solution of the problem.

Implementation of Chosen Alternative

Chrysler executives rented an American Motors plant in Kenosha, Wisconsin, to build Chrysler automobiles. The AMC workers avoided a layoff and Chrysler fulfilled its requirement of greater short-run reduction capacity.

Developing decision alternatives led to a creative idea that helped Chrysler stay efficient and at the same time sell more cars.

The real success of the executives of Chrysler laid in the fact that they had evaluated all three alternatives considerably with proper feedback from the employees and mangers concerned with each alternative. At the same time they did not show hindsight bias, overconfidence, did not influence by the problem framing and did not give too much weight to the readily available information.

Their decision illustrates all the decision steps, and the process ultimately ended in success.