Features of decision making in business
Decision making is a fundamental process and one of the main functions of managing various structures, including business. The decision-making process is called the circulatory system of the organization, the heart of management, is an important aspect of the businessman's activities. Therefore, studying the specifics of decision making in business is a prerequisite for understanding business as an activity.
Before you begin to analyze the decision-making process in business, you need to consider the psychological features of decision making.
As the main areas of psychological research, decision making can be identified as follows:
• Decision-making in activities. The main representatives of this approach are VD Shadrikov and AV Karpov.
• Decision-making under risk and uncertainty. The main representatives are TV Kornilova, D. Kaneman, P. Slovik, A. Tversky, and others.
• Adoption of management decisions. The main representatives - A. V. Karpov, L. Yu. Karas, O. A. Kulagin.
• Decision making in problem situations. The main representatives are NI Bulaev, B. Perfiriev.
In the psychological literature, there are two different terms that are used on the problem of decision making:
1) decision making - making decisions in the sense of deciding, making choices;
2) problem solving - solving the problem (problem).
Behind each term there are certain concepts.
There are also several approaches to understanding the decision-making process in the management literature: normative, descriptive and prescriptive.
The normative approach was formulated in the framework of a mathematical or formal decision theory. The central idea of this model is the concept of a "rational person" who, through mathematical and economic analysis, chooses the best alternatives, actions and solutions. It is assumed that the person is initially known for all the alternatives, taking into account all the variables, as well as the data needed to evaluate the alternatives. Also in this model, factors that can influence the decision-making process (personal, external and internal, etc.) are not taken into account. The normative approach offers standardized procedures, rules, so-called decision-making recipes, a description of how decisions are to be made.
The descriptive approach, on the contrary, describes the actual decision-making procedure under the influence of various factors on the person and the organization. According to this approach, people are more often guided not by economic considerations, but by their own thoughts and feelings.
Synthesis of these models is presented within the prescriptive approach. This model describes how a person should act, trying to analyze and ponder all aspects of the problem and solve it. Thus, the features of logical thinking and intuition are simultaneously taken into account, as well as the support of mathematical methods as auxiliary tools in decision-making.
Let's consider the main stages of the decision-making process proposed in the framework of the normative model. AV Karpov proposes to consider the structure of the decision-making process in the form of a ring (Figure 2.1)
Fig. 2.1. Resolved ring
Let's take a closer look at each of the stages presented.
Identifying a problem situation involves diagnosing - identifying the situation as such; defining its zones & quot ;, establishing relationships with other parties of the activity; the characteristics of its content, the identification of its key contradictions and the setting of the objectives of the proposed solution in it. Here we answer three initial questions: what is available, what needs to be achieved, what is the difficulty of the transition from the cash to the desired.Analysis of the content of the problem situation includes three main aspects: an information analysis of the situation in order to reduce its uncertainty and bring it to a view more accessible to control it; the definition of the main limiting factors, which usually give rise to a problem that requires a decision; the formulation of the basic requirements for the solution - the criteria, which will then be used as a basis for choosing one of several alternative options.
The wording of alternatives includes searching, identifying, and generating new ones, i.e. not specified by the normative, possible exits from the problem situation. Studies show that the overall quality of managerial decisions is a direct function of the number of alternatives formulated at this stage.
The evaluation of alternatives is carried out according to the system of formulated criteria and in accordance with the main objectives of the activity. At this stage, a multifaceted consideration of the advantages and disadvantages of each of the alternatives. They are considered in the forecasting plan, taking into account the dynamics of the environment. This phase is also referred to as the weighting of alternatives phase.
Choosing an alternative is essentially the decision itself. The basic normative principle of this stage, formulated in the theory of rational solutions, is the maximization postulate: it is necessary to choose the alternative that has the greatest integral "utility", i.e. maximizes the possible winnings and simultaneously minimizes the expected losses, losses.
Implementation of the decision - the development of special procedures aimed at its implementation. The main factor of this stage, which contributes to the emergence of problems and contradictions, is the discrepancy between those who accept and those who implement solutions.
Control of execution, evaluation of effectiveness and correction of the decision. Any decision and especially a solution in business requires feedback about its results. Only in this case the process of business management can be effective and efficient. It should also be noted that in the process of monitoring, evaluation and correction, the experience of decisions is accumulated, which is a necessary condition for the development of a person as a professional.
In various scientific fields related to management, there are many types of solutions. Here are some classifications of the types of solutions most often encountered in the activities of business entities.
1. According to the degree of rationality, the following types of solutions are distinguished.
Intuitive decisions are taken on the basis of intuition, subjective feeling, the sense that it is right. The leader does not engage in conscious weighing of all for and against for each of the options, often does not even fully comprehend the situation, just makes a choice. Such decisions dominate everyday life, although they are often encountered in solving organizational problems.
Decisions based on judgments, are made on the basis of knowledge and experience. At the heart of solutions of this type is the forecast of the future results of the solution, based on the analogy with past situations and the results of past decisions.
Rational problem solving assumes the formation of all possible reasonable alternatives to the solution, the development of criteria for their evaluation, and the choice on this basis of the preferred option.
2. Depending on the type of problem being solved (innovation), four types of solutions are distinguished.
Routine solutions have a routine, routine character, are often repetitive procedures. The employee is guided by the instruction or the existing program of actions. For example, when solving material and technical issues of an organization, if there is a trusted supplier, the manager does not need any special efforts, he acts according to the established scheme. This level does not involve a creative approach, the generation of new solutions, on the contrary, it allows to save efforts for solving problems of a more complex level. Problems can arise if the manager incorrectly evaluates the situation and acts illogically, violates the instructions, causing interference in the established effective work.
Selective solutions are related to a task that does not involve an unambiguous decision. At this level of decision, the manager faces a choice problem, but alternatives are limited and known. In this case, the leader requires initiative and freedom of action, but within a limited range. Its task is to evaluate the advantages and disadvantages of alternatives and choose the best. As an example of this type of solution, one can choose one of the alternative strategies proposed by the experts to promote the company's products.
Adaptive Solutions are also associated with the choice of alternatives. The difference from the previous level lies in the availability of some new ideas, sometimes arising in connection with the need to adapt existing options to new conditions. Thus, the manager is looking for a new solution to a known problem. The success of a manager depends on his personal initiative and ability to put forward new ideas. An example of this type of solution may be a personnel decision, i.e. retraining an employee of the organization and transferring him to a new vacant position in the same organization if there are external applicants.
Innovative solutions are associated with new, previously not encountered tasks. In order to achieve a satisfactory result, they require a completely new approach. The manager should be able to understand completely new and unpredictable problems, the solution of which often requires the development of the ability to think in a new way. This is the most complex type of solution, because, on the one hand, it requires a lot of effort and cost from the decision-maker, on the other - is associated with a high risk that the decision will fail and not achieve its goals. Innovative solutions are necessary for the organization to gain competitive advantages, maintain its efficiency.
3. Classification of decisions on the level of the structured situation (AV Karpov).
Deterministic decisions occur in structured situations. When preparing such decisions,
regulatory rules. The task of such solutions is elimination of risk elements.Probability solutions are characterized by the use of non-normative procedures, allow a degree of risk and are necessary for solving problems associated with non-standard situations.
4. Organizational decisions are also subdivided into two main categories - programmed and unprogrammed (G. Simon).
The programmed solutions are repetitive and routine solutions for which certain procedures for their adoption are developed, representing a certain sequence of steps by standard methods and rules. These procedures can not be reviewed every time a problem occurs. There are clearly defined conditions in which such decisions are made. When making a programmed decision, the established rules and strategies often indicate which approach to choose. In other words, the programmed solutions are suitable for typical situations that may arise in an organization's operations.
As O. A. Kulagin points out, it is very important that the leaders of organizations are confident that they use really correct methods that should not only be carefully justified, but also constantly developed.Unprogrammed solutions are new, unstructured (that is, they can not be broken down into a series of simple, programmed ones) or solutions for which there are no established methods, some specific sequence of necessary actions to solve the problem. Therefore, the manager must develop a new decision procedure.
Currently, it is difficult to single out the pure manifestations of these two types, so the programmed and unprogrammed solutions are treated as two poles of a segment within which most of the existing organizational decisions can be located.
5. The following solutions are distinguished by the level of organizational responsibility.
Strategic decisions assume the broadest level of responsibility. They reflect the position of the businessman in relation to the environment. For example, the chocolate maker decided to start promoting its product on the market in the neighboring area.
Tactical solutions are associated with a specific implementation of the idea, its technical implementation. In our example, these are decisions about how to allocate your resources for the promotion of goods in a new market.
Operational solutions are everyday organizational decisions (how to deliver cargo, who is responsible, payment, costs, etc.). The manufacturer from our example should coordinate actions, such as contacting customers, selling reports, getting rid of problems, managing the spread of production.
All these decisions are interrelated. Operational decisions ultimately affect strategic as well as strategic impacts on all others.
In the management structure of any businessman, a number of important elements are singled out: goal-setting, forecasting, planning, organization, control, etc. All of them are important in their own way for a successful activity and an entrepreneur. Many specialists in the field of management argue that the most essential element among these aspects of the manager's work is the adoption of managerial decisions.
A distinctive feature of the decision-making process in business, and especially in small business, is that it is much more difficult to standardize and reduce to a limited set of algorithms, in this regard, the role of subjective psychological factors is very great. Especially, given the fact that the leader and the characteristics of his personality play a major role in business.
The place of the decision-making process in the overall structure of management is due to several circumstances.
First, the decision-making process is one of the most important stages of strategic planning. It is localized between the phases of analysis of strategic alternatives and the actual implementation of the chosen strategy. At the same time, the decisions made are of the greatest importance for the entire functioning of the organization, are strategic both in direct and in evaluative sense.
Secondly, the decision-making process is an essential component of the implementation of all management functions. We can say that it is a kind of mechanism for their implementation. Thus, we can give several examples: the definition of the goals of the organization involves their choice from some alternative set of goals, the decision to choose an organizational structure, the choice of a strategic planning option, as well as the choice of forms, methods and periodicity of control are also associated with the adoption solutions.
Finally, thirdly, any stage of the activity of the head is connected with the need to evaluate the work already done, the degree of achievement of the solution of various problems and tasks. Therefore, at the end of each stage, the manager decides whether the goals originally set are achieved, whether this stage of work can be considered complete and move on to the next. Thus, decision-making plays the role of a unique link between the stages and phases of managerial activity. That is why the process of making managerial decisions in the context of the listed issues is given with a binding function.
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