Explain the different types of managerial decisions. Describe the decisions made under different states of nature. Explain with an example of your organization or any organization you are familiar with. Briefly describe the organization you are referring to.
Solution : Different types of managerial decisions
Irreversible
These are type of decisions, which if made once cannot be undone. Whatever is decided would then have its repercussions for a long time to come. It commits one irrevocably when there is no other satisfactory option to the chosen course. A manager should never use it as an all-or-nothing but instant escape from general indecision.
Reversible
These are the decisions that can be changed completely, either before, during or after the agreement of taking action. Such types of decisions allows one to acknowledge a mistake early in the process rather than perpetuate it. It can be effectively used for changing circumstances where reversal is necessary.
Experimental
These types of decisions are not final until the first results appear and prove themselves to be satisfactory. It requires positive feedback before one can decide on a course of action. It is useful and effective when correct move is unclear but there is a general clarity regarding the direction of action.
Trial and Error
In this type of decision making, knowledge is derived out of past mistakes. A certain course of action is selected and is tried out, if the results are positive, the action is carried further, if the results appear negative, another course is adopted. And so on and so forth a trial is made and an error is encountered. Till the right combination takes place, this situation continues. It allows the manager to adopt and adjust plans continuously before the full and final commitment. It uses both, the positive and negative feedback before selecting one particular course of action.
Made in stages
Here, the decisions are made in steps until the whole action is completed. It allows close monitoring of risks as one accumulates the evidences from out-comes and obstacles at every stage. It permits feedback and further discussion before the next stage of the decision is made.
Cautious
It allows time for contingencies and problems that may crop up later at the time of implementation. The decision-makers hedge their best of efforts to adopt the right course. It helps to limit the risks that are inherent to decision-making. Although this may also limit the final gains, it allows one to scale down those projects which look too risky in the first instance.
Conditional
Such type of decisions can be altered if certain foreseen circumstances arise. It is an ‘either / or’ kind of decision with all options kept open. It prepares one to react if the competition makes a new move or if the game plan changes radically. It enables one to react quickly to the ever changing circumstances of competitive markets.
Delayed
Such decisions are put on hold till the decision–makers feels that the time is right. A go-ahead is given only when required elements are in place. It prevents one from making a decision at the wrong time or before all the facts is known. It may, at times result into forgoing of opportunities in the market that require prompt action.
BEING DECISIVE
The ability to take timely, clear and firm decisions is an essential quality of leadership, but the type of decision needed, varies according to the circumstances. Learning to recognize the implications of taking each type of different decisions leads to error minimization.
Being Positive
Taking decisive action does not mean making decisions on the spur of the moment. Although, it may be necessary in emergencies and as also occasionally desirable for other reasons. A true leader approaches the decisions confidently, being aware of consequences and fully in command of the entire decision–making process.
Making Fast Decisions
It is important to be able to assess whether a decision needs to be made quickly or it can wait. Good decision-makers often do make instant decisions – but they then assess the long-term implications.
Identifying issues
It is crucial to diagnose problems correctly. Before any decision is made identifying and defining the issue removes the criticality. This also means deciding who else needs to be involved in the issue, and analyzing the implication of their involvement.
Prioritizing factors
While making a decision, a manager needs to prioritize on important factors. Some factors in a process are more important than others. The use of Pareto’s rule of Vital Few and Trivial may help in setting up of the priorities. Giving every factor affecting a decision equal weight makes sense only if every factor is equally important. The Pareto rule concentrates on the significant 20 percent and gives the less important 80 percent lower priority.
Using advisers
It is advisable to involve as many people as are needed in making a decision. In making collective decisions, specific expertise as well as experience of a person both can be used simultaneously. The decision-maker, having weighed the advice of experts and experienced hands, must then use authority to ensure that the final decision is seen through.
Whetting decisions
If one does not have the full autonomy to proceed, it is advisable to consult the relevant authority – not just for the final go, but also for the input. It is always in the interest of the subordinate to have the plans whetted by a senior colleague whose judgment is trusted and who is experienced. Even if there is no need to get the decision sanctioned, the top people are likely to lend their cooperation well if they have been kept fully informed all the way long, of the decision path.
MANAGERIAL DECISION MAIKING
In this installment of our guide to organizational management we look at managerial decision making...
Effective managers are tasked with making decisions ranging from large to small on a daily basis. An effective organization employs managers who are problem-solvers and who can make decisions constantly.
It is critical to first prioritize issues and problems based on the issues potential effect on the organization. Those that stand to have the greatest impact should be dealt with first, and all problems need to be addressed in a systematic way prior to a decision being made.
Because a first impression is just that, and does not necessarily reflect the entire situation, a manager must avoid jumping to conclusions. Collecting information from more than one source to avoid bias, and completely assessing all pertinent (and verifiable) information prior to rendering a decision is strongly recommended.
Collecting information in order to obtain a complete understanding of the issue is only the first step, however. Once the information is available, then it is wise to brainstorm different solutions and possible options in order to get more than one perspective. Such options can start out as wide-ranging, and then can be narrowed down to fit the scope of the problem.
Having identified a set of options and solutions, feedback and suggestions on them, along with alternatives, should be sought from consultations with others. For the most part, group decisions (particularly where the group contains people who the end decision will affect) are preferable to those made by individuals as a pool of knowledge, skills and experience can be drawn upon.
Tools, techniques and analysis methods (such as: Pareto Analysis; Paired Comparison Analysis; Grid Analysis; PMI; Six Thinking Hats; Starbursting; Decision Trees) can then be applied. These are not conclusive, but they do offer an objective and somewhat scientific approach to decision making. Theyre particularly useful when the decision-makers judgment is liable to be clouded by being too closely involved with the issue at hand.
Then comes the time to weigh the pros and cons of a decision. Which option or solution gives most to the organization whilst taking least from it? Few decisions will be as clear cut to hold no drawbacks. Negatives are acceptable though, so long as the positives sufficiently outweigh them.
Degrees of Outcome Predictability
Certainty
Risk
Uncertainty
Ambiguity
Certainty
Full knowledge of available alternatives
Full knowledge of what outcome will result from each alternative
Few certain decisions in the real world.
Risk
Knowledge of what the alternatives are
Know the probabilities of outcomes resulting from each alternative.
Uncertainty
Goals are known, but information about alternatives and future outcomes is incomplete (probabilities unknown)
Some alternatives may be completely unknown
Ambiguity
Objectives to be achieved are unclear
Little, if any, knowledge of alternatives
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