Page 88 - DCOM102_DMGT101_PRINCIPLES_AND_PRACTICES_OF_MANAGEMENT

Principles and Practices of Management

Notes Decision-making occurs as a reaction to a problem. A discrepancy exists between some current
state of affairs and some desired state, requiring consideration of alternative courses of action.
Moreover, every decision requires interpretations and evaluation of information. Data is typically
received from multiple sources and it needs to be screened, processed, and interpreted. What
data is relevant to the decision will depend on the perception of the decision-maker.

5.1 Components of Decision-making

Decision-making involves certain components like:
1. Decision environment: Every decision is made within a decision environment, which is
defined as the collection of information, alternatives, values, and preferences available at
the time of the decision. An ideal decision environment would include all possible
information, all of it accurate, and every possible alternative. However, both information
and alternatives are constrained because the time and effort to gain information or identify
alternatives are limited. The time constraint simply means that a decision must be made
by a certain time. The effort constraint reflects the limits of manpower, money, and
priorities. (You wouldn't want to spend three hours and half a tank of gas trying to find the
very best parking place at the mall.) Since decisions must be made within this constrained
environment, we can say that the major challenge of decision-making is uncertainty and
a major goal of decision analysis is to reduce uncertainty. We can almost never have all
information needed to make a decision with certainty, so most decisions involve an
undeniable amount of risk.
The fact that decisions must be made within a limiting decision environment suggests two
things. First, it explains why hindsight is so much more accurate and better at making
decisions that foresight. As time passes, the decision environment continues to grow and
expand. New information and new alternatives appear–even after the decision must be
made. Armed with new information after the fact, the hindsighters can many times look
back and make a much better decision than the original maker, because the decision
environment has continued to expand.
The second thing suggested by the decision-within-an-environment idea follows from the
above point. Since the decision environment continues to expand as time passes, it is often
advisable to put off making a decision until close to the deadline.
2. Effects of Quantity on Decision-making: Many decision-makers have a tendency to seek
more information than required to make a good decision. When too much information is
sought and obtained, one or more of several problems can arise.
(a) A delay in the decision occurs because of the time required to obtain and process the
extra information. This delay could impair the effectiveness of the decision or
solution.

(b) Information overload will occur. In this state, so much information is available that
decision-making ability actually declines because the information in its entirety can
no longer be managed or assessed appropriately.

Example: A manger spent a day at an information-heavy seminar. At the end of the day,
he was not only unable to remember the first half of the seminar but he had also forgotten where
he parked his car that morning.
(c) Selective use of the information will occur. That is, the decision-maker will choose
from among all the information available only those facts which support a
preconceived solution or position.

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