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Decision Making

By: Kamyar Shah

Decisions are made everyday, and it is described as intelligently processing information that will result in rational decision making. A manager undertakes the responsibility of making rational choices by being logical and consistent in a decisive manner. Assessments of descriptive, normative, and behavioral decision theories will be the theoretical foundation of this paper. Also, the three different theories will be discussed in relation to teamwork, diversity, and the ethics of organization.

Main Conclusions

The theories examined in this paper illustrate three different types of decision making; each of them influences the process of decision making in an organization differently. The descriptive decision theory concentrates on the immediate solutions, while the normative decision theory has an idealistic standpoint - opposites of extreme. The behavioral decision making theory acts as a middle-man where its main purpose is to be the mediator between the descriptive and normative decision theory. In spite of their differences, all three theories share one common feature: rational decision in any give circumstances.

Recommendations

In order to run a successful organization, management has to understand the different theories behind decision-making process. Even though the theories are bounded by rationality, each theory values teamwork, diversity, and ethics at different levels. Thus, different levels of managements use different types of decision making process for the survival of the company. It is important to clearly distinguish the theories' boundaries and limitations to successfully decide which variables are important at each level of an organization.

Decision-making

Decision making is not specifically reserved for the management; is done daily by everyone. From choosing home appliances to family dinner preparations, decision making is a part of everybody's daily routine. To better comprehend the managements' role of decision making in an organization, three theories of decision making will be discussed: descriptive, normative, and behavioral theory. However, for the purpose of easy comparison and contrasts, the theories will be analyzed in relations to management types: i.e. technical mangers, organization managers and institutional managers.

Background:

Decision making is more than randomly choosing an option, but a cognitive process or a thought-out process to achieve rational decisions. Individuals, from all levels of an organization make decisions. Not all decisions are multifaceted, but their decisions affect their job securities as well as the organization's interest. A successful decision making process involves rationally analyzing the problems to achieve the most efficient choice that will compliment the situation. According to Walls "the premise behind rationality in organizations is based on the notion that reasonable people will respond to their environment by assessing known facts, estimating possible outcomes, and weighing those outcomes against their respective costs Decision making process differ from one level of management to another, however, they all share common responsibility; rational choices that are consistent, and "value-maximizing choice within specified constraints

Descriptive Theory

The descriptive or positive theory is a black-and-white concept where individuals visualize how things are rather than how things should to be. Descriptive theory focuses on the choices made in a situation, and considers decision as a single event According to Shrode and Brown, the "descriptive decision theory is based on describing, as precisely as possible, the actual decision-making behavior of the decision-maker" and "how people...make decisions". In a relation to management type, descriptive theory is associated with the technical managers, where their primary concern is to solve problems immediately and "have a short-run time horizon" Computational decision making strategies utilized by the technical managers allow them to solve problems swiftly and effectively since the solution to problems are accomplished by "computing various types of input and output data, and then manipulating the data in accordance with the criteria of rationality" According to Petit, solutions to technical managers problems are "quantitative in nature" and "concerned with concrete problems that require immediate solutions"

Normative Theory:

The normative theory, also called prescriptive theory, narrates how things should be, and lean towards philosophical approach in decision making. This particular theory utilizes well informed and rational individuals to organize alternatives that will lead to a successful end result that will benefit the organization in the long run. The normative theory carries ethical responsibilities as well as guidelines to seek optimum solutions. Thus, the normative theory "attempt to describe the behavior (or hoped for behavior) of a human decision maker...who wished to use intellectual tools to make decisions". In relations to management type, normative is closely linked with institutional managers (IM) because they "have a philosophic point of view" and "rely in wisdom, experience, and philosophic insight in making important decision." Decision strategy for institutional managers' are judgmental because IM "have a long-run time horizon...The future is always hard to read and is highly qualitative: therefore it is interpreted subjectively." Institutional Mangers' primary responsibility to the firm is to insure firm's survival by managing uncertainties of firm's environment.

Behavioral theory

Behavioral theory implicates how people deal with uncertainties, and takes into an account both the descriptive and normative theories. Behavioral decision theory is bounded by rationality of the world, and the decisions are made based upon decision-maker's perception on given situation. According to Brooks, Highhouse, et al, "behavioral decision...has shown that people's judgment do not always derive from their underlying beliefs, but rather from the need to formulate their opinions as a result of having to express them." According to Petit "behavioral theory of management has most in common with the social system school...social system school focuses on the organization and what we have called the organization level of management" The organizational managers synchronize technical and institutional managers' transactions by acting as the mediator or an intermediary. Thus, the decision-making strategy of an organizational manager is to compromise in the interest of organizational viability.

Theories in relevance to teamwork, diversity, and ethics

Depending on the level of management or the structure of organization, variables such as teamwork, diversity, and ethical factors might illustrate an issue. It can increase the complexity of management's decision-making issues. However, incorporating the variables into different management decision-making can increase open-line of communication, generate additional alternatives and ideas, and increase accuracy.

The descriptive decision theory focuses on immediate resolution of problem with little or no concerns to ethical issues, teamwork, and diversity. This is mainly due to the fact that the speed and the efficiency of decision-makings are valued rather than comprehension of knowledge and ideas. Descriptive theory is "concerned with the choices actually made in a given situation." Even though this approach will eliminate miscommunications and speed up the reaction process, it will limit creativity, and can only be helpful in achieving short-term goal.

The normative theory is committed to ethical approach of management and relies on the "wisdom, experience, and philosophic insight" of people. In an Industrial Engineer: IE article, "A diverse group of people is likely to outperform...and brightest problem solvers...offer different perspectives that...result in better solutions." Since this approach deals with the long-term goals, it is important to utilize diverse teamwork's wisdom, knowledge, and rationality. Such integration of diverse employees may create a better platform for effective results.

In this particular approach a balanced and optimized reliance on all factors is possible and viable. Behavioral decision making process is political in nature because it acts as a mediator for both descriptive and normative decision making. It deals with uncertainties to make a best possible choice under given circumstance.

Future Trends:

Decision will be made at all levels of an organization, but the question of making the "right" decision will be based on the quality of teamwork, diverse work environment, and commitment to ethical choices. Managers and the employees have a social responsibility as well as the desire to survive, thus creating a natural environment which requires the greatest possible efficiency.


Limitations, Conclusions and Recommendations:

The three theories of decision making are generally different, but they all share one common goal: making rational decisions. While the descriptive theory focuses on how things are, the normative theory concentrated on how things should be in a philosophical way. Behavioral theory, on the other hand, stands in the middle of descriptive and normative theory in order to counter-balance their strengths and weaknesses of decision making. There is no right or wrong method to decision making because it all depends on the type of management, type of an organization structure, and the goals. In a large organization, it is necessary to have all of the three theories available to achieve both the short and long term goals set by the company: successful organization should deploy all legal and ethical tools in order to maximize efficiency and effectiveness. This will ensure the greatest possible platform for organizational success and survival, which in turn creates a platform for responsible corporate governance and increased satisfaction of all stakeholders.

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