Literature Review
Decision making is one of the major functions that are undertaken by leaders in order to induce different modifications in the operations for upholding the sustainability of the business. Rationality of the decisions is bound by principles, which might be often affected by the human frailties. The identification of the nature of risks and mitigation of the same is based on the decision making prospects of the management. The discussion will be undertaking a review of different literatures relating to the risk effect and the high stakes and the manner in which the decision making of the firm affects the risk quotient faced by the same.
Popovi? et al. (2012) stated that incomplete information and hasty decisions of the management results to the uncertainty in management of organizations. Incomplete information on the different legislations related to the taxation and Job cuts has affected the decision making prospects of the business while operating in diverse economies. There are different risks that are encountered by organizations while undertaking their operations in diverse economies. Risks relating to the insurance, damages and financial risks affect the smooth functioning of enterprises. Kugler, Kausel and Kocher (2012) stated that rational decision making is specifically based on the clear and unambiguous knowledge of the management relating to the nature of the issues and the manner in which they might be mitigated. However, Johnson et al. (2013) stated that lack of suitable knowledge on every perspective of the situation restricts the efficacy of the decisions that are undertaken by the management. Anticipation of the risks that might be faced by the organizations while planning the processes is addressed through the decisions that are undertaken by the same. However, lack of suitable knowledge of the uncertainties and the market conditions affects the organizational abilities of adhering to efficient decision making.
Waas et al. (2014) stated that rational decision making is based on the identification of the comprehensive alternative course of action that might be undertaken by the business for avoiding the uncertainties. However, Stiggelbout, Pieterse and De Haes (2015)argued that the clash of interests and divergent thinking processes results to irrational decision making. The identification of the alternative course of actions helps in reducing the uncertainties that might b effaced by the organization while undertaking the operations. The key elements of change in the organizational performance are based on the identification of the risks that are faced by the same and mitigation of the same through rational decision making. However, Hopfe, Augenbroe and Hensen (2013) stated that the anticipation of risks is based on different assumptions that are undertaken by the management of organizations which might not be applicable. It affects the decisions that are undertaken by the business executives resulting to degradation in the performance of the enterprise.
Johnson et al. (2013) stated that monitoring of consequences is one of the major steps that is undertaken by the management in order to adhere to the rationality of the modification. However, Kugler, Kausel and Kocher (2012) argued that the clash of ideas and ego in the management board affects the rational decision making process which is again a sign of human frailties leading to irrationality of the designed processes. The interpretive potential of the management plays major role in the decision making process of the business. However, Zsambok (2014) opined that lack of interpretive potential affects the management’s understanding of the market environment of businesses. The uncertainties that might be faced by organizations relating to the economic recessions in different markets are identified through conduction of surveys. However, Stiggelbout, Pieterse and De Haes (2015)stated that lack of proper interpretive potential of the management affects the data collection and knowledge capabilities, which results to irrational decision making. Therefore, it might be stated that the decision making capabilities of the organization is restricted through the human frailties relating to emotions.
Impact of incomplete information and hasty decisions
The potentials of the organizations in understanding the risks in an unbiased and unambiguous manner are supported through consultations with experts in the field. Popovi? et al. (2012) stated that consultation on the market risks that might be faced by the organization with the experts helps businesses in enhancing the understanding of the risks. On the other hand, Zimmermann (2012) stated that the lack of adaptability of the organization to different business markets affects the decision making phenomenon and the identification of the necessary steps that might be undertaken by the same in order to mitigate the risks. However, Thiel et al. (2012) stated that the human frailties relating to the interpretation of the different market dynamics affects the smooth functioning of the same.
The decision making prospects in organizations are mostly based on the organizational culture, the processes and the structure of the business. Waas et al. (2014) stated that the organizational culture helps in assisting and inducing positivity in the business processes. Positive culture of the organization enhances communication among the management and the workforce, which helps organization in consulting with the stakeholders and thereby mitigates the uncertainties that are faced by the business. Moreover, the positive culture in organizations enhances the chances of stakeholder involvement and proactive participation of the same in the processes that are planned by the business. Hopfe, Augenbroe and Hensen (2013) stated that the involvement of stakeholders in the processes provides the organizations with the scope of consulting, which assists the same in identifying different alternatives resulting to the rational decision making.
Decisions also play a major role in assisting the organizations in understanding the priorities that drives their activities in a risk assessment and management process. Wang et al. (2014) stated that the risk assessment process that is undertaken by the organization is based on the thorough assessment of the situation and the competencies of the same in the market. The rationality of the decision making process depends on the interpretation of the market condition that is faced by the organization. However, Gershman, Horvitz and Tenenbaum (2015) stated that the assessment of the market structure and the condition is often ambiguous that affects the decision making functions of organizations. The key changes that are undertaken by organizations are based on the contemplation of the priorities based on the market situation and its position. However, lack of proper allocation of resources and ambiguity in understanding the priorities that are faced by organizations results to different uncertainties. Lerner et al. (2015) stated that the typological nature and rigid framework of the rational decision making model affects the organizational performance as the ever changing situation of the business environment and the developing priorities might not match with the parameters of the model. On the other hand, Stiggelbout, Pieterse and De Haes (2015) stated that the human frailties to define the different objectives of an organization in an unambiguous manner affects the performance of the organization.
The cognitive elements of the management contemplate the success of the decision making functions of the same while developing the processes as per the needs of the business enterprise. Policies that are formed by the organizational management correlates to the uncertainties that might be faced by the same in the future. However, Popovi? et al. (2012) stated that the proper identification of the uncertainties helps the management in formulating effective policies and thereby undertakes decisions in order to facilitate the smooth functioning of the business. Zsambok (2014) stated that management fails to contemplate the different uncertainties that might be faced by the same while interpreting the position of the same in the international markets. The assessment of risks that might be faced by the organization relates to the different considerations of the management behaviors and the response of the workforce to the changes. Johnson et al. (2013) also stated that biases in the management also affects the rational decision making systems of businesses which results to failure in the enterprise operations. The biases are the contemplation of human frailties that affects the smooth functioning of the business.
Identifying and mitigating risks
The development of organizations is based on the decisions that are undertaken by the management of the same while identifying the position of the same in the international markets. Kugler, Kausel and Kocher (2012) stated that the identification of the context of risks that might be faced by the organization and the manner in which they might be prioritized brings forth positive modifications in the operations of the business. Assessment of the different alternatives depends on the cognitive behavior and outlook of the management towards the uncertainties that might be faced by the organization. Zimmermann (2012) argued that the capability of the management in analyzing the situation is based on the perspectives of the management that differs from one person to another. It affects the decision making systems of the business which is a result of human frailties.
Therefore, from the above discussion it can be stated that the idea of rational decision making in the management is characterized by different human frailties, which affects the efficacy of the decisions that are undertaken by the same. The discussion indicates the notion as to the manner in which the reality of decision making is dissimilar to the typological rational decision making model. The different human related factors that affect the identification of risks in the organizational context resulting to decision making failures.
References
Gershman, S. J., Horvitz, E. J., & Tenenbaum, J. B. (2015). Computational rationality: A converging paradigm for intelligence in brains, minds, and machines. Science, 349(6245), 273-278.
Hopfe, C. J., Augenbroe, G. L., & Hensen, J. L. (2013). Multi-criteria decision making under uncertainty in building performance assessment. Building and environment, 69, 81-90.
Johnson, D. D., Blumstein, D. T., Fowler, J. H., & Haselton, M. G. (2013). The evolution of error: Error management, cognitive constraints, and adaptive decision-making biases. Trends in ecology & evolution, 28(8), 474-481.
Kugler, T., Kausel, E. E., & Kocher, M. G. (2012). Are groups more rational than individuals? A review of interactive decision making in groups. Wiley Interdisciplinary Reviews: Cognitive Science, 3(4), 471-482.
Lerner, J. S., Li, Y., Valdesolo, P., & Kassam, K. S. (2015). Emotion and decision making. Annual review of psychology, 66.
Popovi?, A., Hackney, R., Coelho, P. S., & Jakli?, J. (2012). Towards business intelligence systems success: Effects of maturity and culture on analytical decision making. Decision Support Systems, 54(1), 729-739.
Stiggelbout, A. M., Pieterse, A. H., & De Haes, J. C. J. M. (2015). Shared decision making: concepts, evidence, and practice. Patient education and counseling, 98(10), 1172-1179.
Thiel, C. E., Bagdasarov, Z., Harkrider, L., Johnson, J. F., & Mumford, M. D. (2012). Leader ethical decision-making in organizations: Strategies for sensemaking. Journal of Business Ethics, 107(1), 49-64.
Waas, T., Hugé, J., Block, T., Wright, T., Benitez-Capistros, F., & Verbruggen, A. (2014). Sustainability assessment and indicators: Tools in a decision-making strategy for sustainable development. Sustainability, 6(9), 5512-5534.
Wang, J. Q., Peng, L., Zhang, H. Y., & Chen, X. H. (2014). Method of multi-criteria group decision-making based on cloud aggregation operators with linguistic information. Information Sciences, 274, 177-191.
Zimmermann, H. J. (2012). Fuzzy sets, decision making, and expert systems (Vol. 10). Springer Science & Business Media.
Zsambok, C. E. (2014). Naturalistic decision making: where are we now?. In Naturalistic decision making (pp. 23-36). Psychology Press.
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