Managerial decision making - Essay Example

Managerial Decision Making A hallmark of today's business environment is its chaotic nature. This chaos is rooted in unprecedented rates of change and high levels of complexity. In turn, rapid change and effective decision-making create an environment of high risk in which decision makers possess little certainty about what the future holds. They perceive events through opaque lenses and base their decisions on large measures of speculation and only small doses of certainty. A large part of the complexity of today's projects is tied to the variety of options facing all project players, from project managers to team members to customers. Naturalistic decision making helps managers to understand how decision are made in complex situations, uncertainty and changing conditions. Research and understanding of naturalistic decision making helps organizations to interpret cognitive functions and improve their everyday performance. Following Cannon-Bowers et al 1996: "There is no doubt that the overriding strength of the NDM perspective on decision making research is its focus on how decisions are made in complex, real-world environments" (p. 193). Managers do not always remember and thus learn from their mistakes, because they do not realize they have made mistakes. A naturalistic decision making gives managers means to disengage themselves from a particular situation, from its narrative, from one's roles, and from a dominating conceptual scheme. Effective application and understand of naturalistic decision making enables one to assess one's situation, to evaluate present and new possibilities, and to create decisions that are not parochially embedded in a restricted context or confined by a certain point of view. Naturalistic decision making takes into account ethical theory but not abstractly (Flin 1996). In complex environment, naturalistic decision making is crucial for organizational behavior and effective performance. This is because in the first instance ethics has to do with human relationships and human activities, not with abstract formal principles. It generates conclusions from that particular set of events, taking into account not merely the situation but its narrative and the set of mental models or conceptual schemes that frames these events. Naturalistic decision making and cognitive processes are essential to get one from a particular situation to a more disengaged perspective (Bazerman 1995). It is often argued that human beings are motivated primarily by self-interest; in business, managerial or corporate self-interest, sometimes even greed, accounts for questionable and even egregious behavior. Moreover, none of us is perfect, so in large companies there are bound to be errors of judgment. Other explanations also attempt to account for these events and their perpetrators (Flin 1996). It is then sometimes argued that social, political, and legal institutions, along with the corporate culture and the particular roles and role responsibilities of the managers and companies in question, create a causal nexus that constrains what might consider morally appropriate behavior and often precludes the consequential avoidance of harm. In contrast to traditional decision-making, "Under naturalistic decision making a similar emphasis on task complexity has not been made explicit. In fact, attention to factors that contribute to decision complexity, and how decision makers cope with these, must be examined more fully if the definition of core NDM features is to be fully realized" (Cannon-Bowers et al 1996, p. 193). Following naturalistic decision making approach, organizations and managers understand that acting in one's own interest where one's well-being is the object as well as the subject of action does not necessarily exclude taking into account the interests of others, for those interests are almost always necessary to achieve success. Third, acting in one's own self interests in either sense is not necessarily evil. One must be careful to distinguish not only the quality of the action itself and its object, for example, oneself or one's company, but also the motivation, for example, greed, self-interest, or the well-being of certain stakeholders, and what in fact that action produces (Lee et al 1999). Many self-interested, even greedy actions do not harm others. The discussion of cognitive aspects of naturalistic decision making helps managers to understand the difference between the decision-making processes in complex situations. Connected to the conflation of legal and moral issues is a second factor that may affect managerial moral judgments. In making moral judgments, managers who are also members of professional organizations, for example, lawyers or engineers, must weigh their organizational responsibilities against their professional responsibilities (Lee et al 1999). "To the decision maker, strategies of naturalistic decision making (such as RPD) feel like an intuitive response rather than an analytic judgment of alternative options" (Flin 1996, p. 262). The codes proscribe the actions of these professionals just because they are members of those professions, and at least some of these code-proscriptions are meant to override both personal inclinations and nonprofessional organizational or corporate demands. There are certain expectations in occupying these roles that most of us adhere to most of the time, and that we make moral judgments about role behavior are crucial elements of human experience and social interrelationships (Bazerman 1995). The process of naturalistic decision-making takes into account context and tradition, impartiality, and minimum moral standards, is just that: a process, a dynamic process, in which one challenges the presuppositions of tradition, tests one's impartiality against context, and continues to shape one's decisions and refine one's moral minimums. Moral judgments are a result of a delicate balance of context, evaluation, the projection of moral minimums, and the presence or absence of imagination (Lee et al 1999). Such a process is seldom complete, pure objectivity is impossible, but infallibility of judgment is not part of the goal. Indeed, moral judgments are at best partial solutions. Still, they should be solutions that serve as the starting place or models for new series of decisions, even though these, too, are always at risk of being morally challenged. The linchpin of this process is a highly developed approach that perceives the nuances of a situation, challenges the framework or scheme in which the event is embedded, and imagines how that situation and other similar situations might be different (Salas and Klein 2001). A special problem for organizations is that "naturalistic decisions are often made under conditions in which the decision maker holds personal norms and goals that are at odds with those of the larger organization. This is an important consideration, but we contend that many important naturalistic decisions are made under conditions of personal and organizational goal congruence" (Cannon-Bowers 1996, p. 193) The ideal is not absolute agreement but rather temporary equilibrium, a dynamic consensus that provides the ground and impetus for moral progress. The rapidity of change in today's world contributes measurably to complexity. One way it does this is by creating moving targets. This is seen clearly in our attempts to define needs and requirements. Even as we think we finally understand the customers' needs, they are changing. Sources of change include changing technology, the changing position of competitors, changing economic forces (for example, the growth of inflation), changing players, and changing budgets (Bazerman 1995). Naturalistic decision making helps organizations to respond effectively to changing environments and deal with complexity. Change also contributes to two facets of complexity. First, it leads to increases in the volume of information that must be dealt with. Knowledge grows over time, and today it is growing exponentially. Second, change increases the options companies face. Somehow a change must be controlled. The task force can strengthen the needs analysis in at least three ways (Salas and Klein 1999). First, since it is made up of representatives of different constituencies, it allows for the cross-fertilization of ideas. The resulting suggestions regarding customer needs will therefore be more robust than if needs were identified by only one or two people. Second, the task force allows the different customer groups to develop a consensus about their needs through give-and-take interaction (Salas and Klein 1999). This shifts some of the burden of decision making from the needs analysts to the customers themselves. Furthermore, whatever priorities emerge through this process are likely to be less arbitrary than if determined by a single individual. Whatever else they do, managers still have major decision-making responsibilities. This is not to say that they make decisions unilaterally. Now more than ever, in fact, decision making is a cooperative effort between managers, the workforce, and customers. In such an environment, the job of managers is not to call the shots independently but to ensure that effective naturalistic decisions are made (Cohen et al 1972). Naturalistic decision making is fundamentally a process of prioritizing options. The best options go to the top of the list, the worst to the bottom. Consider the choice to buy a car. Potential buyers consider a number of selection criteria, including price, performance, styling, safety, and prestige. In the absence of an explicit decision-making methodology such as the analytical hierarchy process, they intuitively assess the performance of the target cars on each of these criteria and then sum up the results (Bazerman 1995). Researchers suggest that the organization should develop tight methods and procedures for cost and schedule estimates. The procedures can be form-driven so that estimators need merely fill out a form to get the estimates they need (Salas and Klein 1999). As part of this process, estimators should be supplied with checklists of items that should be included in the estimates. Explicit methods and procedures for estimating will increase the consistency of estimates in the organization and will counter the amateur 's propensity to contribute to the "missing components" problem. Organizations that employ a sales force to sell their products and services encounter a common problem: during pre-award negotiations, the salespeople promise clients features and services that the project and production staff cannot provide. In trying to understand why problems exist, project staff should determine whether the problems are occurring in a politically charged environment (Cohen et al 1972). This is important to know. Political environments are notoriously messy. In such environments, rational solutions are less important than "politically correct" ones. There are a range of players that play some role on a typical project: the project sponsor, the project manager, team members, a contracting specialist , subject matter experts, contractors, the purchasing department, sales staff, outsourced workers, and an assortment of players on the client side, including the client's representative, users, middle and senior management , client subject matter experts, and so on. Each of these players has his or her own view on what the project should produce. For the purposes of this discussion, we will divide the key players into two categories: users and developers (Harrison 1999). Although this oversimplifies the typical project environment , it enables us to focus on the principal features of time-boxed scheduling without getting bogged down in extraneous details. This process of prioritization underlies all rational decision making , from deciding what soup to buy at the supermarket to selecting a contractor to build a new house. Consequently, it becomes apparent that effective decision making should have systematic attempts to prioritize built into the decision-making process. Over the years, many tools have emerged to assist in the prioritization process. One of the primary reasons for the undesirable outcomes is a paucity of decision making (Harrison 1999). Most managers and their institutions do not lack moral principles. Rather, they sometimes have a narrow perspective on their situation. They lack a sense of the variety of possibilities and moral consequences of their decisions and the ability to develop a wide range of issues, consequences, and solutions. Some individuals are trapped in an organizational framework and tradition of which they are only vaguely aware, a framework that often drives their decision-making and excludes considerations of moral concerns. Most managers and most companies are not without ethical difficulties (Perrin, 2001). Indeed, it would be strange if they were, because neither people nor the companies they constitute are infallible. All human experiences are embedded in a set of narratives, many of which are not of one's own making. People are born into a particular historical tradition, and we find ourselves part of religious, social, and cultural traditions embedded in a language (Harrison 1999). Sometimes these narratives can be distorting, as the Audi and breast implant cases illustrate. Thus, the existence of some narrow-minded decision-making, or the dominance of strongly differentiated role responsibilities, does not morally excuse misbehavior or the occurrence of untoward consequences that could have been avoided. Second, because mental models and narratives are incomplete and overlap, human choices are not merely context determined. They usually involve smart managers and reputable companies that somehow, create scenarios that have untoward consequences (Perrin, 2001). Ethical issues in business, like those in personal life, are troublesome, the more so because most managers in today's open and competitive economy are smart, well-intentioned people, and the companies they manage ordinarily intentionally try to avoid egregious behavior (Harrison 1999). In sum, naturalistic decision making is an important part of modern management and organizational behavior science because allows companies to understand reasons and moral factors which influence a decision making process. The existence of roles permits a predictability of human behavior and a stability in social relationships. Ordinarily there are good reasons for acting according to role demands and ideals. Finally, given a particular set of recurring events, one begins to examine and sometimes revise the moral rules or precepts of common morality themselves and respond effectively to changing social and economic conditions and complexity. Bibliography 1. Bazerman MH 1995, Judgment in Managerial Decision Making (3rd Edition), Wiley. 2. Cannon-Bowers, J. A., Salas, E., Pruitt, J. S. 1996, Establishing the Boundaries of a Paradigm for Decision-Making Research. Human Factors, 38, p. 193. 3. Cohen M. D, March J. G. and Olsen J. P.1972, A Garbage can model of organizational choice. Administrative Science Quarterly 17: 1-25 4. Harrison E.F. 1999, The Managerial Decision Making Process, 5th Edition , Houghton Mifflin, Boston. 5. Perrin, B. M., Barnett, B. J., Walrath, L., Grossman. J. D. 2001, Information Order and Outcome Framing: An Assessment of Judgment Bias in a Naturalistic Decision-Making Context. Human Factors, 43, p. 227. 6. Flin, R., Stewart, K. Slaven, G. 1996, Emergency Decision Making the Offshore Oil and Gas Industry. Human Factors, 38, p. 262. 7. Lee D., Newman P., and Price R. 1999, Decision Making in Organizations, Financial Times/Pitman Publishing. 8. Salas, E., Klein, G. A. 2001, Linking Expertise and Naturalistic Decision Making. Lawrence Erlbaum; 1 edition. Read More