Significance of issue
“Managers continually are required to make decisions – to make the ‘right’ decisions. But decision making is affected by biases” Disucss this statement.
With the changes in economic condition and ramified growth of the business on international level, each and every organization needs to take proper strategic decisions to make the business effective. There are several internal and external factors which may directly and indirectly affect the managerial decision. However, managers need to make the strategic decisions to take the imperative decision such as undertaking strategic alliance, implementing expansion decision in business. In this report, research analysis of managerial decision and its impact on the business have been analyzed. In addition to this, business of the managerial decisions will also be analyzed with its positive and negative factors on the future growth and effective organization functioning. It is analyzed that when mangers make decisions they needs to analysis whether the undertaken decision will add value to their business or not. There is need to adopt the critical framework in which managers need to make decisions. These decisions are very important as it is necessary know the frame in which a manager and he should be an open minded person who can take decisions actively. Making decisions is a huge process in which a manager needs to think about all the pros and cons of the decision and the way it can affect the organization. With the changes in business functioning and economic factors, organization needs to make decision which has equal impact on the one class of employees. There should not be any biasness in the business decision if management wants to make long term decisions in business.
The main significance of issue is to determine the factors which may impact the manager’s decisions to make the right decision and how they are affected by the biasness in organization. It is analyzed that taking bias decision in organization could be good for the short term success of organization but in long term in not only impact the efficiency of the business but also lower down the efficiency of the business. It is analyzed that the main reason of the increased employee turnover in business is related to the manager’s decision which is affected by the biasness of the decision. It is required to take the right decision by the managers if they want organization to grow effectively in long run. The main significant issue of taking right decision but affected by the biasness is related to how well it will impact the business in negative manner in the long run. There are several factors such as motivation factors, negative impact of the wrong decision and organization policies and frameworks which may negatively impact the organization work culture in long run.
Managerial decision-making
Managers continually required making decision- to make the ‘right’ decisions. But decision making is affected by biases.
Managers are the people who have the responsibility to management group of people who works for the achievement of organizational goals. As per the perception of the Tyler, (2013), it is reflected that there are different decisions that a manger needs to take regarding the work and other things too. They are responsible in hiring, training and providing motivation to the employees. As per the views of Saladis and Kerzner, (2011) it is revealed that they are also responsible to resolve the issue of the employees and provide them the best solution. They are considered as the authority that can help the organization in achieving the goals and objectives by making proper decisions. They usually speak on behalf of the organization and employees under them. They need to coordinate all the activities that going on in a specific operation or a process. As stated by Furnham, (2012), it is reflected that one of the major roles of manager is to make decision on a regular basis that does not create a negative impact on the employees and other subordinates in the organization. They need to make right decisions that can be declared as right from the aspect of everyone. This is a very common issue that the decision making is affected by biases and it happens because favoritism is present everywhere. This literature review is basically about the views of different writers and their perception.
According to the review by Thanh Pham, there are many mistakes that people usually do while making decisions. They always try to explore some ideas that can rectify their mistake and help them in decision making. As we know, that a manager has so many responsibilities to handle a team and the operations done by team member. Author has described some features of a good decision maker. As per the views of (Watts, 2012) it is revealed that It can help in good decision making and remove the entire difficult barrier.
- Plunging in- It refers to collect the information and conclude the decision. It is important to think about the issues a manager is facing.
- Frame Blindness- It mean to rectify the wrong problems, because of mental framework. The best option need to be chosen to fulfill the objectives.
- Lack of frame control- It refers when it becomes difficult to define the problems in more than one way.
- Overconfidence in judgement-It refers to the overconfidence of manager in taking the decision. It happens when manager are very sure of their opinions and assumptions
Thanh Pham describes that there is a very critical framework in which managers need to make decisions. These decisions are very important as it is necessary know the frame in which a manager and he should be an open minded person who can take decisions actively. Making decisions is a huge process in which a manager needs to think about all the pros and cons of the decision and the way it can affect the organization. As stated by Ghani, Said and Laswad, (2010), it is divulged that in such situation, learning helps a lot as a manager learn a lot about his team and the tasks allotted to them. There are some activities like taking the feedbacks from all the employees to improve the things, analyze the learnings in an effective way. He should also learn the process that affected the past decisions. In his book, it is clearly mentioned how to make decisions and people can also learn from the book too. The power of decision making has been shown clearly in the book. There are some steps that help in improving the decision making skills. As per the perception of Beeri and Navot, (2014), it is divulged that the author has defined the ways that can simplify the decision making process and how to remove some barriers that comes in the way of making decisions. He has highlighted some very common barriers that are known but still people fail to realize the same. The main issue that a manager can face is the favoritism that he has in the team. There is some biasness that is hidden and the same influence the decision making of the manager. It creates a negative impact on the team.
Views of different writers
According to John S. Hammond, Ralph L. Keeney and Howard Raiffa, there are so many hidden traps in decision making that affects the decision making process directly and indirectly. There are some managers who are very prudent and take decisions after evaluating the whole situation while some are very overconfident and they take decisions very quickly. Some managers take costly steps in order to defend themselves for unlikely outcomes. So, there are the three major traps that affect most of the managers in decision making. There are some techniques that are available to overcome such issues but the issue of biases is the one that is difficult to overcome. Most of the managers take biased decisions and pretend that they took the right decision. But this is not a correct way to justify as people around know that there is a biasness in the decision of the manager. According to the authors, decision making is a very critical function and an important job. As stated by Belleghem, (2012) it is revealed that a wrong decision can spoil a business, an operation, image of the manager or career of an employee. Sometimes the ways are wrong in which the decision making has been done like sometimes the information has been provided is not correct and analysis of cost and benefit has not done properly. So sometimes, there is a fault in the whole process and decision maker is correct from his point of view. It is difficult to come out of the trap. But there are some serious solution by which the manager can come out of the trap.
- Overconfidence can be reduces by creating some estimates. As per the views of Babinski, (2016), this study suggests thinking about the extremes, low and high ends of the decisions. It states that all the pros and cons of the decisions should be considered. It helps a manager in trusting a random valuation. The next step to be taken after that is to estimates the extremes. It is important to go through all the circumstances that can happen so that the manager can come to know all the best and worst conditions.
- As per the views of (Mascia, 2014), it is reflected that to settle the prudence trap, it is important to estimate honestly and explain all the things to everyone who can use them and the same have not been adjusted. It is necessary to provide honest input to the people who are responsible to give estimates. Then these estimates are tested to know their impact. The last step is to take a sensitive look of all the situations.
- As stated by Burgess and Currie, (2013), it is reflected that the main actions to minimize the distortion that are caused by some variations, it is necessary to examine all the assumptions to check whether they are influenced by the memory. There is a need of taking the actual statistics to take proper decisions.
- As stated by Fatayer and Hassanain, (2015), it is divulged that these traps also affect the decision making in terms of biasness. Manager interact employees on a personal level as well as on professional level and it results in the creation of favoritism. As per the views of Madsen, (2016), it is reflected that this favoritism creates an issue for the manager while taking decisions and it usually creates biasness for the person who is the favorite one. This trap is very much critical as the way to come out of it is difficult. Manager listens to the employees and employees work as per his orders. This creates a very healthy relationship between both of them. Managers become so much confused or overconfident when it comes to favoritism as they do not able to know what is wrong and what is right. It is necessary to cope up with such situation by doing the proper analysis of the situation as stated by John S. Hammond, Ralph L. Keeney and Howard Raiffa. There are some factors that makes the manager to caught into this trap is the emotional instability of the manager as manager is a high position in an organization and he should always know the difference between the professional as well as personal life. This helps in making the decision making process and can convert things simple too.
According to Lowell W. Busenitz and Jay B. Barney in their book ‘Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making’, they have stated that decision making process take place in small organizations as well as large organizations. Managers are making irrational decisions that are hampering their credibility. It creates a negative impact on the image of the manager and ultimately, the employees start taking them for granted. It is important to find out the reason why managers change their decisions according to biasness. In some situations, comprehensive and cautious decision making is not at all possible and it is affected by biases that affect the right decision making. There is a study in which they involved some managers and entrepreneurs who founded their own firm or working in an organization from a long time period. They have described that the min reason of biased decision making is the overconfidence of the employee’s. They think that their position of superiority can never break them down and all the employees and stakeholders are bind to accept the decision without asking any question. This is the main reason why bad managers exist in the industry. The force the employees by their deeds to create a negative image of them and create negativity about them in the minds. There are multiple hurdles that a manager faces when he start working in an organization, at that period of time no one is so much confident enough to take decisions by biasness but as per the passage of time, it happens a lot due to the overconfidence.
Hidden traps in decision-making
As stated by Humphrey, (2012), it is revealed that there is some cognitive biasness that is proved to be good sometime, as it can stop leading in major errors. It is very difficult to remove biasness from the organization as it creates an impact on the operations and the terms of the manager with the employees. It is a very common thing that every manager has some of the favorite people in the team or in the organization and it reflects in a very clear picture in the decision making process.
In this research, all the evidences and data sources have been collected from the several sources such as employees, managers and promoters of the business who have direct and indirect relation with the business functioning. The primary data have been collected from employees, managers and promoters who are indulged in operating business on international level. A research has been done that is mentioned in this book by Lowell W. Busenitz and Jay B. Barney that has mentioned that strategic decision making hampered by biasness has sometimes proved as a very beneficial thing for the organization and in the startup years, it has been assumed as an advantage. In some cases, it has been proved so negative too as it creates a very negative image of the manager and degrade the credibility of him. Managers can overcome such situation by doing a critical analysis of decision making process by removing a little bit of over confidence from the mind. The evidences and data sources in this research is journal articles, statistical data, all the primary and secondary sources such as observation, meeting and direct personal meeting. It will assist in identifying the strategic problems and issues which company might face due to the negative impact of the managerial decision affected by the biasness in organization. In order to implement the effective research, survey methodology is used to collect required data for this research. This research has been conducted on the employees and managers of the multinational companies. The data have been collected from the 10 respondents in which employees and managers and promoters have given their viewpoints on how manager’s decisions will be affected due to the biasness of the decisions. In addition to this, journal articles and documents have shown that how manager’s decisions will reduce the overall productivity and increased the employee turnover of the business due to the biasness of the decisions.
This analysis has shown that GE Capital, Wesfarmers and Woolworth’s companies have faced high complexity and reduced their overall turnover due to the increased biasness in organization. In 2011, GE capital had to face high increase in its employee turnover due to the increased biasness in its business process. It not only impacted the business functioning in negative manner but also lower down the overall outcomes of the business. This company had to face at least 22% decrease in its overall output due to the increased complexity of the business and increased employee turnover. If managers want to make effective decisions which are biasness free then they will have to establish the structured decisions which could be undertaken to increase the overall outcomes of the business. By using the journal articles, documents, a personal could identify how manager’s decisions will reduce the overall productivity and increased the employee turnover of the business due to the biasness of the decisions
References
Babinski, P. (2016). The Perceived Importance of Role-Specific Competencies for Health Care Leaders Establishes the Need to Expand Role Theory. The Health Care Manager, 35(2), pp.164-179.
Beeri, I. and Navot, D. (2014). Turnaround management strategies in local authorities: managerial, political and national obstacles to recovery. Journal of Management & Organization, 20(01), pp.121-138.
Belleghem, S. (2012). The Conversation Manager. London: Kogan Page.
Burgess, N. and Currie, G. (2013). The Knowledge Brokering Role of the Hybrid Middle Level Manager: the Case of Healthcare. British Journal of Management, 24, pp.S132-S142.
Fatayer, F. and Hassanain, M. (2015). The Importance of the maintenance manager during the design Stage. Saarbru?cken: LAP LAMBERT Academic Publishing.
Furnham, A. (2012). The talented manager. Basingstoke: Palgrave Macmillan.
Ghani, E., Said, J. and Laswad, F. (2010). Does level of balanced scorecard adoption affect service quality? A study on Malaysian local authorities. International Journal of Managerial and Financial Accounting, 2(3), p.256.
Humphrey, A. (2012). Transformational leadership and organizational citizenship behaviors: The role of organizational identification. The Psychologist-Manager Journal, 15(4), pp.247-268.
Madsen, S. (2016). Power of project leadership. [Place of publication not identified]: Kogan Page Stylus.
Mascia, A. (2014). Project manager: leader, influencer e conflict manager. PROJECT MANAGER (IL), (20), pp.19-23.
Saladis, F. and Kerzner, H. (2011). Bringing the PMBOK Guide to Life. Hoboken: John Wiley & Sons.
Tyler, T. (2013). Why people cooperate. Princeton: Princeton University Press.
Watts, G. (2012). The power of introspection for executive development. The Psychologist-Manager Journal, 15(3), pp.149-157
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