The Importance of Decision Making in Business
Question:
Discuss about the Understand The Pros And Cons Decision-Making Process.
The smooth running of the business requires the ability to make the good decisions. If any wrong decision is made it can affect the working of the whole company. It is necessary for the owners of the business to understand the pros and cons of each of the decisions before accepting the same and make sure that they continuously improvise in the decision-making skills of decision-making. The initial step of the decision making process is to first identify the idea and gather relevant information of the same, next is to understand the alternatives and their results along with evidences. The decision-making final step is to take the action and its consequences. The main assumption is the decision making process is to anticipate that it will be fruitful and result in the maximum yield (Block et al. 2016). The development of the business is based on the sound decision-making and it arises from the collective decisions taken by the staffs and the management. The different kinds of programs, policies and the strategies are converted into actions through the process of decision-making.
Effective and Successful decisions make profit to the business. Therefore, the corporate process of making decision is a process in any business, which is critical. However, at times due to lack in proper managerial leadership and corruption in the organization unethical decision-making may take place. Due to this the organization may face distress and suffer a financial loss (Ferrell and Fraedrich 2015).
In the decision making process, a single course of action from a set of alternatives are chosen. The various Decision Making steps Process are as follows:
Step 1: Purpose of identification that deals with the following questions
- identification of the various problem
- need for solving the problem
- parties who are ia part of decision making process and its execution
- Analyzing the time of execution of the decision.
Step 2: gathering of Information
In the process, it is to obtain as much as knowledge related to the factors and involved stakeholders in the problem (Heyler et al. 2016).
Step 3: Alternatives principles
The step deals with the judgment of the alternatives should be set. When it comes to the criteria of defining, business goals as well as the corporate culture should considered (Vahlne and Johanson 2017).
Step 4: analyzing the choices
Here, the best option is to list down all the ideas . Prior to the idea generation step, it is Important to understand the problem and the prioritization of causes.
Step 5: Evaluation of alternatives
Decision-making step is to evaluate each alternative. In this step, experience and effectiveness of the judgment principles come into play.
Step 6: Select the best alternative
After analyzing the Step 1 to Step 5, the selection of the best alternative is selected.
Step 7: decision execution
Implementations of the idea into action
Step 8: Evaluate the results
It is to verify the success of the process
The five main decision making criteria are as follows:
- The purpose of the decision: In these criteria, the main reason for taking the decision is pointed out along with the pros and cons of the same.
- Ethics: Decision-making that is Ethical refers to the method of assesing and selecting among the choices consistently with ethical principles. It is a very important component in the making the decisions, it is important to eliminate and perceive alternatives that are unethical and select the ethical choices (Meyer-Zehnder et al.2017).
Commitment: The need to do the appropriate execution irrespective of the cost
Consciousness: It refers to the awareness for acting consistently and apply convictions that re moral to regular behavior
The Decision-Making Process
Competency: The process of collecting and evaluating the information, development of alternatives, and anticipate the potential risks and consequences (Kocet and Herlihy 2014)
Effective decisions are effective if the decision makers achieve what is to be obtained or achieved. A choice that produces unintended and undesirable results is ineffective. The key to making effective decisions is to think about choices in terms of their ability to accomplish the important goals (Romiszowski 2016).
- Timeline to execution: In this step, the time for the execution of the decision is calculated so that it takes place on time.
- Resource accessibility: In this criteria the various financial and non financial resources are found out along with their accessibility.
The three models of Decision-making:
It is a difficult task to make a logical decision in a business. All the decisions can be categorized into the following basic three models:
The models are:
1) Rational model
2) Bounded rationality model
3) Retrospective decision-making model
All the three models are advantageous for understanding the decision-making nature in the enterprises or organization. The models are based on certain assumption on which decisions are taken.
Rational classical model: The Rational model, which is, also known as the classical model is the first attempt to know the process of decision making. It is classical approach to know the process of decision-making. According to the classical model, there are various steps in the process, which are discussed as follows. In the classical model, the issues of the management are made clear along with the objectives. The people agree on criteria and weights, there are known alternative, the consequences are anticipated beforehand and the decision making are rational. Moreover, the decisions are not biased in recognizing the problems, as they are capable of possessing all relevant information along with the present and future consequences of decisions. The decision makers search for the alternative that enhances the desired result (Lewis and SIU 2015).
Bounded rationality model: Bounded rationality model or the administrative model is the decision-making process that involves achievement of the organizational goal. It demands that maker of the decision should properly know the course of action that is an alternative in order to achieve the goal. They must have all the information and the ability to analyze properly the various alternative courses of action to attain the organizational goal (Knapp, Gottlieb and Handelsman 2015). There is presence of desire to select the best solution by selecting the alternative, which will satisfy the goal achievement. According to Wittmer (2016), rationality is the term of objective and intelligent action. Behavioral nexus between ends and means characterize it. If appropriate means are chosen to attain the desired results ends, the decision is rational.
The bounded rationality model that is based on the concept developed by Herbert A. Simon does not assume the individual rationality in decision process. It instead, assumes that the individuals, while seeking the best solution settle for much less than anticipated, because the decisions that they are confronting demand greater information, processing capabilities and time, than they possess. The decision makers settle for “bounded rationality or limited rationality in decisions (Pohling et al.2016). This model is based on certain basic concepts that are as follows:
- Sequential Attention to alternative solution:
It refers to the peoples tendency to inspect decisions one at a time instead of the process of identifying the all possible solutions and stop the process of searching once an solution is found that is a acceptable.
- Heuristic:
It deals with the assumptions that follows up the alternatives course of action into areas that have a high success probability.
- Satisfying: As per Herbert Simon the “satisfying” is choosing an action that is satisfactory under the given situations. It deals with the decision makers tendency of accepting the first alternative that meets their minimally acceptable requirements rather than pushing them further for an alternative that produces the best results.
Retrospective decision model or institution: This model of decision-making pouts the focus on the techniques in which decision-makers attempt to rationalize their choices after they have been made and try to justify their decisions. Per Solberg has developed this mode (Wittmer 2016)l.
The decisions making should carry on with the measurement the pros and cons impact in the organizational consequences and should be in favor of the positive outcomes. This avoids the anticipated losses to thebusiness and keeps the company running with a sustained growth. Ethical decisions sustain and generate trust, fairness and caring, responsibility, and demonstrate respect. These behaviors provide a foundation for making better decisions by setting the ground rules for our behavior. In order to avoid the unethical behavior, it is the duty of the management to ensure a sound leadership. conducting the process of decisions making and accepting the consequences is the only method to stay in control of the corporate life and time.
Block, L.G., Keller, P.A., Vallen, B., Williamson, S., Birau, M.M., Grinstein, A., Haws, K.L., LaBarge, M.C., Lamberton, C., Moore, E.S. and Moscato, E.M., 2016. The squander sequence: understanding food waste at each stage of the consumer decision-making process. Journal of Public Policy & Marketing, 35(2), pp.292-304.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson Education.
Heyler, S.G., Armenakis, A.A., Walker, A.G. and Collier, D.Y., 2016. A qualitative study investigating the ethical decision making process: A proposed model. The Leadership Quarterly, 27(5), pp.788-801.
Knapp, S.J., Gottlieb, M.C. and Handelsman, M.M., 2015. Ethical dilemmas in psychotherapy: Positive approaches to decision making. American Psychological Association.
Kocet, M.M. and Herlihy, B.J., 2014. Addressing value?based conflicts within the counseling relationship: A decision?making model. Journal of Counseling & Development, 92(2), pp.180-186.
Lewis, L.F. and SIU, W.S., 2015. Corporate Entrepreneurship and Ethical Decision-Making of Marketing Managers. In Proceedings of the 1997 World Marketing Congress (pp. 646-655). Springer, Cham.
Meyer-Zehnder, B., Schleger, H.A., Tanner, S., Schnurrer, V., Vogt, D.R., Reiter-Theil, S. and Pargger, H., 2017. How to introduce medical ethics at the bedside-Factors influencing the implementation of an ethical decision-making model. BMC medical ethics, 18(1), p.16.
Pohling, R., Bzdok, D., Eigenstetter, M., Stumpf, S. and Strobel, A., 2016. What is ethical competence? The role of empathy, personal values, and the five-factor model of personality in ethical decision-making. Journal of Business Ethics, 137(3), pp.449-474.
Romiszowski, A.J., 2016. Designing instructional systems: Decision making in course planning and curriculum design. Routledge.
Vahlne, J.E. and Johanson, J., 2017. The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments. In International Business (pp. 145-154). Routledge.
Wittmer, D.P., 2016. Developing a behavioral model for ethical decision making in organizations: Conceptual and empirical research. In Ethics in public management (pp. 57-77). Routledge.
Wittmer, D.P., 2016. Developing a behavioral model for ethical decision making in organizations: Conceptual and empirical research. In Ethics in public management (pp. 57-77). Routledge.
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