Management practices for entrepreneurs  

Managers as Decision Maker 

Report by Group 2:

Preet Gopani A005

Kartikay Goyal A011

Ark Jain A003

Anubhav Agrawal A021

Ishani Dhariwal A024

Radhika Aggarwal B023

Pranav Furia B007

 

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What is Decision Making?

Decision-making is an integral part of modern management. Essentially, Rational or sound

decision making is taken as the primary function of management. Every manager takes hundreds
and hundreds of decisions subconsciously or consciously making it as the key component in the
role of a manager. Decisions play important roles as they determine both organizational and
managerial activities. A decision can be defined as a course of action purposely chosen from a
set of alternatives to achieve organizational or managerial objectives or goals. Decision making
process is a continuous and indispensable component of managing any organization or business
activities. Decisions are made to sustain the activities of all business activities and organizational
functioning.

Decisions are made at every level of management to ensure organizational or business goals are
achieved. Further, the decisions make up one of core functional values that every organization
adopts and implements to ensure optimum growth and drivability in terms of services and or
products offered.

EffectiveDecision Making

Effective executives do not make a great many decisions. They concentrate on what is important.
They try to make the few important decisions on the highest level of conceptual understanding.
They try to find the constants in a situation, to think through what is strategic and generic rather
than to “solve problems.” They are, therefore, not overly impressed by speed in decision making;
rather, they consider virtuosity in manipulating a great many variables a symptom of sloppy
thinking. They want to know what the decision is all about and what the underlying realities are
which it has to satisfy. They want impact rather than technique. And they want to be sound rather
than clever.

Effective executives know when a decision has to be based on principle and when it should be
made pragmatically, on the merits of the case. They know the trickiest decision is that between
the right and the wrong compromise, and they have learned to tell one from the other. They
know that the most time-consuming step in the process is not making the decision but putting it

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into effect. Unless a decision has degenerated into work, it is not a decision; it is at best a good
intention. This means that, while the effective decision itself is based on the highest level of
conceptual understanding, the action commitment should be as close as possible to the capacities
of the people who have to carry it out. Above all, effective executives know that decision making
has its own systematic process and its own clearly defined elements.

Decision Making Process

Decision-making is a process of selecting the best among the different alternatives. It is the act of
making a choice. There are so many alternatives found in the organization and departments.
Decision-making is defined as the selection of choice of one best alternative. Before making
decisions all alternatives should be evaluated from which advantages and disadvantages are
known. It helps to make the best decisions. It is also one of the important functions of
management. Without other management functions such as planning, Organizing, directing,
controlling, staffing can’t be conducted because in this managerial function decision is very
important. According to Stephen P. Robbins, “decision-making is defined as the selection of a
preferred course of action from two or more alternatives.

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1. Identify the decision

To make a decision, you must first identify the problem you need to solve or the question you
need to answer. Clearly define your decision. If you misidentify the problem to solve, or if the
problem you’ve chosen is too broad, you’ll knock the decision train off the track before it even
leaves the station.

If you need to achieve a specific goal from your decision, make it measurable and timely so you
know for certain that you met the goal at the end of the process.

2. Gather relevant information

Once you have identified your decision, it’s time to gather the information relevant to that
choice. Do an internal assessment, seeing where your organization has succeeded and failed in
areas related to your decision. Also, seek information from external sources, including studies,
market research, and, in some cases, evaluation from paid consultants.

Beware: you can easily become bogged down by too much information—facts and statistics that
seem applicable to your situation might only complicate the process.

3. Identify the alternatives

With relevant information now at your fingertips, identify possible solutions to your problem.
There is usually more than one option to consider when trying to meet a goal—for example, if
your company is trying to gain more engagement on social media, your alternatives could
include paid social advertisements, a change in your organic social media strategy, or a
combination of the two.

4. Weigh the evidence

Once you have identified multiple alternatives, weigh the evidence for or against said
alternatives. See what companies have done in the past to succeed in these areas, and take a good
hard look at your own organization’s wins and losses. Identify potential pitfalls for each of your
alternatives, and weigh those against the possible rewards.

5. Choose among alternatives

Here is the part of the decision-making process where you, you know, make the decision.
Hopefully, you’ve identified and clarified what decision needs to be made, gathered all relevant

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information, and developed and considered the potential paths to take. You are perfectly
prepared to choose.

6. Take action

Once you’ve made your decision, act on it! Develop a plan to make your decision tangible and
achievable. Develop a project plan related to your decision, and then set the team loose on their
tasks once the plan is in place.

7. Review your decision

After a predetermined amount of time—which you defined in step one of the decision-making
process—take an honest look back at your decision. Did you solve the problem? Did you answer
the question? Did you meet your goals?

If so, take note of what worked for future reference. If not, learn from your mistakes as you
begin the decision-making process again.

Importance of Decision Making Process

1. Implementation of managerial function

Without decision-making different managerial functions such as planning, organizing, directing,

controlling, staffing can’t be conducted. In other words, when an employee does, s/he does the
work through decision-making function. Therefore, we can say that decision is an important
element to implement the managerial function.

2. Pervasiveness of decision-making

The decision is made in all managerial activities and in all functions of the organization. It must
be taken by all staff. Without decision-making any kind of function is not possible. So it is
pervasive.

3. Evaluation of managerial performance

Decisions can evaluate managerial performance. When a decision is correct it is understood that
the manager is qualified, able and efficient. When the decision is wrong, it is understood that the
manager is disqualified. So decision-making evaluates the managerial performance.

4. Helpful in planning and policies

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Any policy or plan is established through decision making. Without decision making, no plans
and policies are performed. In the process of making plans, appropriate decisions must be made
from so many alternatives. Therefore, decision making is an important process which is helpful
in planning.

5. Selecting the best alternatives

Decision making is the process of selecting the best alternatives. It is necessary in every
organization because there are many alternatives. So decision makers evaluate various
advantages and disadvantages of every alternative and select the best alternative.

6. Successful; operation of business

Every individual, department and organization makes the decisions. In this competitive world;
organization can exist when the correct and appropriate decisions are made. Therefore, correct
decisions help in successful operation of business.

Approaches of Decision Making

Information on the different approaches to decision-making are given below:

There are several approaches to decision-making which offer insight into the process by which
managers arrive at their decisions. Rational approach is appealing as it is logical and economical.

The other approach is the behavioural approach which attempts to account for the limits on
rationality in decision-making.

The third approach, namely, the practical approach combines features of the rational a
behavioural approaches.

Finally, the personal approach focuses on decision-making processes individuals use in difficult
situations.

A. The Rational Approach

Rational decision-making approach is a systematic, step-by-step process for making decisions. It

assumes that the organization is economically based and managed by decision-makers who are
absolutely objective and have complete information.

The steps of rational decision-making approach are as follows:

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1. State the Situational Goal

At the outset, a goal for a particular situation is stated. Some decision-models do not begin with a
goal. However, it is advisable because it can be used as a standard in determining whether there
is a decision to be made later on.

2. Identify the Problem

In this phase, the problem requiring decision is recognized and diagnosed. It involves
understanding the nature, magnitude and causes of the problem. The purpose of problem
identification is to collect information that has a bearing on the goal.

If there is a discrepancy between the actual situation and the goal, action may be required.
Reliable information is an absolute necessity here. Inaccurate information can lead to wrong
decisions. At this stage, the constraints within which the problem must be solved are also
defined.

3. Determining Decision Type

Now decision- makers must determine if the problem requires a programmed or a

non-programmed decision. If a programmed decision is required, an appropriate decision rule 0s
invoked and a choice is made from the available alternatives.

4. Generate Alternatives

The next step in making a non-programmed decision is to generate alternatives. Here,

decision-makers generate alternatives on the basis of their education-academic as well as
professional, experience and knowledge about the situation.

In addition, information may be sought from colleagues, subordinates, experts and superiors.
Decision-makers may analyze the symptoms of the problems for clues or rely on their own
intuition or judgement to generate alternative solutions.

5. Evaluate Alternatives

Each alternative is assessed in terms of its Strengths and weaknesses, costs and benefits as well
as possible negative consequences keeping in mind predetermined decision criteria. The positive
consequences must be weighed against negative consequences.

The ultimate decision criterion here is whether a particular decision will bring us nearer the goal.
According to Zeleny (1976), the evaluation process usually includes: (a) describing the

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anticipated outcomes of each alternative, (b) evaluating the anticipated costs of each alternative,
and (c) estimating the uncertainties and risks associated with each alternative. In most situations,
the decision-makers do not have perfect information regarding the outcomes of all alternatives at
their disposal.

6. Choose an Alternative

This is the most crucial step in the decision-making process. It involves selecting the best
alternative with maximum positive consequences, least or no negative outcomes, less risks and
minimum costs.

In other words, the expected value of each alternative is determined and the alternative with the
largest expected values is selected. Again, the choice of alternative depends on decision-makers’
education, judgement, experiences, logical analysis etc.

At this stage, it is important to consider contingency plans. Contingency plans are alternative
actions to take if the primary course of action is unexpectedly disrupted or rendered
inappropriate. Planning for contingencies is part of the transition between choosing the preferred
alternative and implementing it.

7. Implementing the Plan

Once a decision is formally accepted, an authorisation is made for its implementation.

Implementation puts the decision into action and involves communicating the decision, gathering
support for and acquiring and assigning resources to ensure that it is carried out.

It builds on the commitment and motivation of those involved in the decision-making process.
Successful implementation requires appropriate use of resources and good management skills,
leadership character sites, reward structure and knowledge and application of group dynamics.
Sometimes the decision-maker begins to doubt a choice already made. This is known as
cognitive dissonance.

Cognitive dissonance is the anxiety a person experiences when two sets of knowledge or
perceptions are incongruent or contradictory. In order to reduce cognitive dissonance, the
decision maker may seek to rationalize the decision further with new information.

8. Control

This is the final stage of a rational decision-making process, wherein, the outcomes of the
decision are measured and compared with the predetermined, desired goals. If there is a

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discrepancy between the two, the decision-maker may restart the process of decision-making by
revising/modifying/setting new goals.

Strengths and Weaknesses of the Rational Approach

This approach has several strengths. It forces the decision-maker to consider a decision in a
logical, sequential manner and an in-depth analysis of alternatives helps him to choose on the
basis of information rather than personal prejudices, emotions or social pressure.

However, its weaknesses are that the manager does not always have perfect information, faces
time and financial constraints, may have limited ability to process information and may not be
able to predict the future accurately. Also, all the alternatives cannot be quantified making
comparisons difficult.

B. The Behavioural Approach

This approach assumes that decision-makers operate with bounded rationality rather than with
the perfect rationality assumed by the rational approach. Bounded rationality is the idea that
decision makers cannot deal with information about all the aspects and alternatives pertaining to
a problem and therefore choose to tackle some meaningful subset of it.

Thus, this process is neither exhaustive nor completely rational and therefore, solutions arrived at
are not entirely ideal. Decision-makers operating with bounded rationality limit the inputs to the
decision-making process, focus their attention on two or three most favourable alternatives
(especially if there is a time constraint), process these in great detail and base their decisions on
judgement and personal biases as well as logic.

This approach possesses the following features:

(i) Use of procedures and rules of thumb which reduce uncertainty in decision-making initially.
For example, uses of models of teaching have been found to enhance student performance in the
past. Hence teachers, knowing the linkages between the two decide to use models of teaching in
classrooms.

(ii) Sub optimizing which refers to knowingly accepting less than the best possible outcome to
avoid unintended negative effects on other aspects of the organization.

(iii) Satisfying refers to examining alternatives only until a solution that meets minimal
requirements is found and then making no further efforts to look for a better one. The search for

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alternatives is generally a sequential process based on procedures and rules of thumb guided by
previous experiences with similar problems.

Such a solution may not always be the optimal solution since the search often ends when the first
minimally acceptable alternative is identified.

This model by Herbert Simon is also known as the Administrative Man Model.

C. The Practical Approach

This approach combines the steps of the rational approach with the worthwhile features and
conditions in the behavioural approach to create a more realistic process for making decisions in
institutions.

According to this approach, rather than generating all alternatives, the decision-maker should try
to go beyond rules of thumb and satisfying limitations and generate as many alternatives as
possible within the given time, money and other Practicalities of the situation.

Here, the rational approach provides an analytical framework for making decisions while the
behavioural approach provides a moderating influence.

Those managers who have a tendency of jumping from one decision to another, making
decisions hastily and impulsively and barking out orders to subordinates usually do not use much
information or a rational approach to decision-making.

D. The Personal Approach

The preceding three approaches explicitly explain the processes involved into decision-making.
However, they do not throw light on how people take decisions when they are nervous, anxious,
worried or agitated-whether in organizations or in personal matters.

Janis and Mann (1977) have provided a more realistic view of individual decision-making in
their ‘Conflict Model’. This model is based on research in social psychology and individual
decision processes. It is a personal approach to decision-making because it deals with the
personal conflicts that people experience in particularly difficult decision situations.

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The model has five basic characteristics:

(a) It deals only with important life decisions such as choosing the nature and type of education
and institution, career, marriage, major organizational decisions etc. that commit an individual or
institution to a certain course of action.

(b) It recognizes that procrastination and rationalization are mechanisms by which people avoid
taking difficult decisions and coping with the accompanying stress.

(c) It explicitly acknowledges that some decisions could possibly go wrong.

(d) It provides for self-reactions in terms of comparisons of alternatives with internalized moral
standards. If a particular course of action violates the decision-makers moral convictions, it is
unlikely to be selected even if it is economically and socially beneficial.

(e) It recognizes that at times the decision-maker is ambivalent about alternative courses of
action. This kind of situation makes it difficult for him to give a whole-hearted commitment to
one single decision. However, major decisions concerning one’s life are either-or decisions that
require commitment to one specific alternative without allowing much compromise.

According to the Janis-Mann conflict model of decision-making, a person, when faced with a
problem, analyzes the situation by seeking feedback (often negative) and asks himself/herself
whether the risks involved are serious if he or she does not make a change.

If the answer is no, the person will continue his/her present activities. This situation is known as
uncomplicated adherence which entails continuing with current activities if doing so does not
entail serious risks.

On the other hand, if the risks involved are serious, if the person does not make a change, the
person will take necessary action to bring about a desirable change. This situation is known as
uncomplicated change which involves making changes in present activities if doing so presents
no serious risks.

Besides, the model also explains the concept of defensive avoidance which entails making no
changes in present activities and avoiding any further contact with associated issues because
there appears to be no hope of finding a better solution.

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If a person has little time to deliberate on whether he needs to make a change perhaps due to his
advancing age he will experience hyper vigilance wherein he may suffer severe psychological
stress and engage in frantic, superficial pursuit of some satisfying strategy.

On the other hand, if a person has two or three years to consider different alternatives, he will
undertake vigilant information processing which implies that he will thoroughly investigate all
possible alternatives, weigh their costs and benefits before making a decision and develop
contingency plans.

​Types of Decision Making

The Types of Decision making can be divided into two parts-

1. Structured problems and programmed decisions

2. Unstructured problems and non-programmed decisions

Structured problems and programmed decisions - Some problems are straightforward. The
decision maker’s goal is clear, the problem is familiar, and information about the problem is
easily defined and complete. Examples might include when a customer returns a purchase to a
store, when a supplier is late with an important delivery, a news team’s response to a
fast-breaking event, or a college’s handling of a student wanting to drop a class. Such situations
are called structured problems because they’re straight-forward, familiar, and easily defined. For
instance, a server spills a drink on a customer’s coat. The customer is upset and the manager
needs to do something. Because it’s not an unusual occurrence, there’s probably some
standardized routine for handling it. For example, the manager offers to have the coat cleaned at
the restaurant’s expense. This is what we call a programmed decision, a repetitive decision that
can be handled by a routine approach. Because the problem is structured, the manager doesn’t
have to go to the trouble and expense of going through an involved decision process. The
“develop-the-alternatives” stage of the decision-making process either doesn’t exist or is given
little attention. Why? Because once the structured problem is defined, the solution is usually
self-evident or at least reduced to a few alternatives that are familiar and have proved successful
in the past.The spilled drink on the customer’s coat doesn’t require the restaurant manager to
identify and weight decision criteria or to develop a long list of possible solutions. Instead, the
man-ager relies on one of three types of programmed decisions: procedure, rule, or policy.

A procedure is a series of sequential steps a manager uses to respond to a structured problem.

The only difficulty is identifying the problem. Once it’s clear, so is the procedure.For instance, a
purchasing manager receives a request from a warehouse manager for 15 PDA handhelds for the
inventory clerks. The purchasing manager knows how to make this decision by following the
established purchasing procedure.

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A rule is an explicit statement that tells a manager what can or cannot be done. Rules are
frequently used because they’re simple to follow and ensure consistency. For example, rules
about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and
fairly.

The third type of programmed decisions is a policy, which is a guideline for making a decision.
In contrast to a rule, a policy establishes general parameters for the decision maker rather than
specifically stating what should or should not be done. Policies typically contain an ambiguous
term that leaves interpretation up to the decision maker. Here are some sample policy statements:

1. The customer always comes first and should always be satisfied.

2. We promote from within, whenever possible.
3. Employee wages shall be competitive within community standards.

Notice that the terms satisfied, whenever possible, and competitive require interpretation. For
instance, the policy of paying competitive wages doesn’t tell a company’s human resources
manager the exact amount he or she should pay, but it does guide them in making the decision.

Unstructured problems and non-programmed decisions ​- Not all the problems managers face
can be solved using programmed decisions. Many organizational situations involve unstructured
problems, which are problems that are new or unusual and for Which information is ambiguous
or incomplete. Whether to build a new manufacturing facility in China is an example of an
unstructured problem. So, too, is the problem facing restaurant managers in New York City who
must decide how to modify their businesses to comply with the new law. When problems are
unstructured, managers must rely on non programmed deci-sion making in order to develop
unique solutions. Nonprogrammed decisions are unique and nonrecurring and involve
custom-made solutions.

Summary

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Characteristic Programmed decisions Nonprogrammed decisions

Type of problem Structured Unstructured

Managerial level Lower levels Upper levels

Frequency Repetitive,Routine New,unusual

Information Readily available Ambiguous or incomplete

Goals Clear,specific Vague

Time frame for solution Short Relatively long

Decision Making Conditions

The three main conditions the managers face when making decisions are:-

1. Certainty
2. Risk
3. And Uncertainty

CERTAINTY​- The ideal situation for making decisions is one of certainty, which is a sit-uation
where a manager can make accurate decisions because the outcome of every alter-native is
known. For example, when North Dakota’s state treasurer decides where to deposit excess state
funds, he knows exactly the interest rate being offered by each bankAnd the amount that will be
earned on the funds. He is certain about the outcomes of each alternative. As you might expect,
most managerial decisions aren’t like this.

RISK​- A far more common situation is one of risk, conditions in which the decision maker is
able to estimate the likelihood of certain outcomes. Under risk, managers have historical data
from past personal experiences or secondary information that lets them assign probabilities to
different alternatives.

UNCERTAINTY​-What happens if you face a decision where you’re not certain about the
outcomes and can’t even make reasonable probability estimates? We call this condition
uncertainty. Managers do face decision-making situations of uncertainty. Under these conditions,
the choice of alternative is influenced by the limited amount of available infor-mation and by the
psychological orientation of the decision maker. An optimistic manager will follow a maximax
choice (maximizing the maximum possible payoff); a pessimist will follow a maximin choice

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(maximizing the minimum possible payoff); and a manager who desires to minimize his
maximum “regret” will opt for a minimax choice.

Decision Making Styles

We make several decisions every day. Some of them are of minor importance whereas others
might have an impact on our lives for a long time to come. A rational decision maker follows
four steps to making a decision that is identify the problem, generate multiple possible solutions
for the problem, based on his decision making style – select the solution deemed most likely and
lastly, implement the solution and evaluate its effectiveness. Let us now study the various
decision making styles in detail.

One’s Individual decision-making style reflects in the decisions taken which there after; affects
all related people and activities. Even in an organization, different managers would have
different styles when it comes to decision making. The decision-making styles are categorized
based on several factors.
Most broadly, the styles are categorized as linear and non-linear thinking style profiles. The first,
linear thinking style is characterized by a person’s preference to use external data and facts and
processing this information through rational thinking to guide decisions and actions. The second,
non-linear thinking style depends on internal sources of information (feelings and intuition) and
processing this information with internal insights to make decisions. Further, linear and nonlinear
can be categorized into seven different styles as explained below:

1) Collective Reasoning – As the name suggests, managers making decisions based on

collective reasoning, gather a group of opinions before arriving at a conclusion. Group consensus
and buy-in from everyone guides the entire process of decision-making. People who believe in
democracy usually follow this style.

2) Data Driven Style – Hard data, especially numbers and statistics, are the basis of
decision-making for these individuals. They take their own time to research, organize and
consider before taking a step forward. The more information they gather, the more confident they
are with respect to the decision they arrive at.

3) Gut Reaction – These decision makers rely on feelings to make quick decisions. They are
risk-takers and highly emotional and sensitive individuals. Therefore, the decisions made by
them are guided by that very moment and are often challenging to be predicted by others.

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4) List Approach - People with this approach move forward only when they have a list of pros
and cons of any decision and the list has been methodically evaluated. Their researched lists give
them confidence and a pre-planned path for the future. These individuals won't make a decision
unless every angle and option has been explored and evaluated in a systematic way.

5) Spiritually guided – Staying close to God or spiritual beliefs and listening carefully for a
clear voice of direction is the process employed by these individuals. Prayer, solitude and retreat
are their key methods of deciding. Whenever a decision has to be made, such people will take an
extended period of time away from all others to stop and meditate or pray about how to move
forward and what decision to be taken.

6) Story living – These individuals make decisions based on the story they will get to tell
afterwards. They want to go to new places, try impossible things and tell the world. These are the
kind of people that are motivated to take decisions that help their story later and are willing to
take high risks for the same.

7) Passive Undecided – People with this style of decision making, ironically, avoid any
decision making. They are happy to move forward with almost any decision, as long as they do
not have to make it. They avoid any sort of conflict and choose to follow others and their orders.
They are just okay with any other person making decisions on their behalf. For them, in every
situation, choices by others will always be the best option.

Decision making styles are categorized on various basis and verticals. One vertical, as mentioned
above has seven categories of decision making styles. Another study suggests that decision
making styles can be broadly classified as Analytical, Conceptual, Directive and Behavioral. The
below diagram explains the above four decision making styles in the best possible manner.

It is clearly visible that there are several styles guiding a person through the process of
decision-making. It is thus, the responsibility of the Managers to recognize that their employees
and colleagues may use different decision-making styles. Some may rely on their gut; some may
rely on external facts while others may decide on the basis of a pros-cons list. However, it is
imperative for the managers to understand that the differences in decision-making styles don’t
make one person’s approach better than the others. It just speaks volume about their individual
personality traits and what guides their decision-making processes.

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Group Decision Making Styles

Further a manager can come across a situation where a group decision has to be taken wherein he
can employ the group decision making styles. The four available options are –
a) Autocratic Group Decision making style – The leader takes complete control and ownership
of the decision. The leader is completely responsible for the outcome, whether the outcome is
positive or negative.
b) Democratic Group Decision making style - The leader gives up ownership and allows the
group to vote. The majority vote decides the final decision.
c) Collective Group decision making style – In this style, the leader will involve all the
members of the organization in all aspects of the decision-making process but make the final
decision alone.
d) Consensus Group decision making style – The leader gives up complete control of the
decision. The whole group is totally involved and invested in the decision.

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Emergency situations require an autocratic style whereas long projects require consensus style.
Knowing which style to use in a particular situation can be the difference between success and
failure, especially in a business environment.

Decision Making Biases and errors

When managers make decisions, apart from using their personal style, they may use “rules of
thumb” to understand complex, uncertain and ambiguous information and thus, simplify their
decision making. Even though managers use the rule of thumb and their personal style, it doesn't
ensure that decisions are biased and error free. There always exists a possibility of errors and

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biases in processing and evaluating information and taking rational decisions. Let us read about
them below:

a) Overconfidence bias – Believing too much in our own ability to make good decisions,
especially when outside of our own expertise.
b) Anchoring bias – Using early first-received information as the basis of making subsequent
judgments.
c) Confirmation bias – Selecting only those facts that support the manager’s decision and
ignoring other relevant facts and information.
d) Availability bias – Making decisions based on most recent and vivid information in the
memory of the manager
e) Immediate Gratification bias – Making decisions that provide quick payoffs as opposed to
those with payoffs in the future, even if better.
f) Selective perception bias – Organizing and interpreting events based on one’s biased
perceptions to make decisions.
g) Framing bias – Selecting and highlighting certain aspects of a situation while ignoring
other aspects.
h) Representation bias – Assessing the likelihood of an event based on how closely it
resembles other events or a similar set of events.
i) Randomness bias – Creating unfounded meaning out of random events.
j) Sunk Cost bias – When the decision makers forget that the current choices can’t correct the
past and waste unnecessary time and effort on past expenditure of time, money and effort rather
than focusing on future consequences.
k) Self-serving bias – Quickly taking the credit for their successes and blaming the outside
factors for failures.
l) Hindsight bias – Falsely believing that the outcome would have been accurately predicted,
once the outcome is actually known.

By understanding one’s personal decision making style, it is possible for the managers to make
adjustments according to the situation and results they are working towards. Strong decision
making requires the ability to assess the situation, determine the best style of decision making,
and utilize that style to come to a positive solution. ​These are leadership skills that will benefit
both personally and professionally​. By consistently using the correct style of decision making,
the manager can prove himself to be a valuable asset as a leader.

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Today’s World

Today’s business world revolves around making decisions, often risky ones, usually with
incomplete or inadequate information, and under intense time pressure. Most men- agers make
one decision after another; and as if that weren’t challenging enough, more is at stake than ever
before. Bad decisions can cost millions. What do managers need to do to make effective
decisions in today’s fast-moving world? Here are some guidelines.

❖ Understand cultural difference.s’. Managers everywhere want to make good decisions. However,
is there only one “best” way worldwide to make decisions? Or does the “best way'' depend on the
values, beliefs, attitudes, and behavioral patterns of the people involved?
❖ Know when it’s time to call it quits. When it’s evident that a decision isn’t working, don’t be
afraid to pull the plug. For instance, the CEO of L.L.Bean pulled the plug on building a new
customer call center in Waterville, Maine—“literally stopping the bulldozers in their
tracks”—after T-Mobile said it was building its own call center right next door. He was afraid
that the city would not have enough qualified workers for both companies and so decided to
build 55 miles away in Bangor."' He knew when it was time to call it quits. However, as we said
earlier, many decision makers block or distort negative information because they don’t want to
believe that their decision was bad. They become so attached to a decision that they refuse to
recognize when it’s time to move on. In today’s dynamic environment, this type of thinking
simply won’t work.

Use an effective decision-making process. Experts say an effective decision-making process has
these six characteristics:

(1) It focuses on what’s important

(2) It’s logical and consistent

(3) It acknowledges both subjective and objective thinking and blends analytical with intuitive
thinking

(4) It requires only as much information and analy- sis as is necessary to resolve a particular
dilemma

(5) It encourages and guides the gathering of relevant information and informed opinion

(6) It’s straightforward

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Build an organization that can spot the unexpected and quickly adapt to the changed
environment. This suggestion comes from Karl Weick, an organizational psycholo- gist, who has
made a career of studying organizations and how people work. He calls such organizations
highly reliable organizations (HROs) and says they share five habits.

(1) They’re not tricked by them . HROs are preoccupied with their failures. They’re alert to the
smallest deviations and react quickly to anything that doesn’t fit with their expectations. He talks
about Navy aviators who describe “lemurs—a gut feeling that something isn’t right.” Typically,
these lemurs turn out to be accurate. Something, in fact, is wrong. Organizations need to create
climates where people feel safe trusting their lemurs.

(2) They defer to the experts on the front line. Frontline workers—those who interact day in and
day out with customers, products, suppliers, and so forth—have firsthand knowledge of what can
and can- not be done, what will and will not work. Get their input. Let them make decisions.

(3) They let unexpected circumstances’ provide the solution. One of Weick’s better- known
works is his study of the Mann Gulch fire in Montana that killed 13 smokejumpers in 1949. The
event was a massive, tragic organizational failure. However, the reaction of the foreman
illustrates how effective decision makers respond to unexpected circumstances. When the fire
was nearly on top of his men, he invented the escape fire—a small fire that consumed all the
brush around the team, leaving an area where the larger fire couldn’t burn. His action was
contrary to everything firefighters are taught (that is, you don’t start fires—you extinguish them),
but at the time it was the best decision.

(4) They embrace complexity. Because business is complex, these organizations recognize that it
“takes complexity to sense complex- ity.” Rather than simplifying data, which we instinctively
try to do when faced with complexity, these organizations aim for deeper understanding of the
situation. They ask “why” and keep asking why as they probe more deeply into the causes of the
problem and possible solutions.

(5) Finally, they anticipate, but also recognize their limits. These organizations do try to
anticipate as much as possible, but they recog- nize that they can’t anticipate everything. As
Weick says, they don’t “think, then act. They think by acting. By actually doing things, you’ll
find out what works and what doesn’t.”

Making decisions in today’s fast-moving world isn’t easy. Successful managers need good
decision-making skills to plan, organize, lead, and control.

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