Avoiding mystification in decision making:
A strategic managerial imperative


By

Ms. Vijit Chaturvedi
Assistant Professor
Lingaya's University
Faridabad

Dr. D.S Yadav
Assistant Professor
FMCA, RBS College
Agra
 


The successful working and survival of any organization depends on how far foresighted are the employees and owners of tat unit prompt, experienced, logical are in decision making. Since it is a consistent chore of every management activity though ranging at different levels whether at strategic, tactical or operational level irrespective of the hierarchical level sound and rational decision making decides to a large extent how far the organization will assure its growing presence in hearts and minds of its customer.

Especially talking about managerial decision that involve element of psychological, social, emotional and personal variables with which decision is affected it becomes imperative for managers to consider and be conscious of factors that affect decision making. This will help in bringing improvements in work, behavior, performance and efficiency of both employee and profitability at organizational level.

Since the executives are entrusted with responsibility of making major decisions these factors are essential to be identified so tat it should not lead organization and work to jeopardy.Though it is always said that decisions need to be rational, as Herbert Simon stated the concept of Bounded Rationality which propounds that every rational decision is bounded by limitations like time, availability of data, authenticity of figures and facts, situation, emotional and economic factors  designing rational decision is a challenge.

Even at most of times when issues are uncertain even managers make decision based on heuristics which  are supposed to be more towards  bias and less towards perfection. Such decision making either which is based on rule of thumb or based on heuristics helps in solving complex business problems  but only to a limited extent.

Thus, though behavioral Economics provides guidelines in finding solution to such impediments in decision making it is essential to understand the different biases that may affect sound decision making-

a) Decision based on Recent Heuristics-In such cases managers or executives take their decision based on available recent news or trends without actually exploring the different other factors that may help in better achievement of results. Simply adapting any practice, policy or approach since it is been adopted by rest others without seeing the applicability, future aspects and repercussions may lead to fatal results. But to save time, working under severe pressure, competing with immediate organization competitors or for maximizing profits in short time may lead to basing decision on such basis.

Instead it should be  well planned based on reliable models and techniques  using a devils advocate approach, replacing the old assumptions and style of working , welcoming new innovative ideas while planning and involving people to develop better insights and expertise.

b) Decisions based on Trends and past assumptions-It is also amongst the most critical area which leads to biased decision making where the executives or managers repeatedly make while making decisions. Based on the past assumptions, practices, trends and experience and completely ignoring the innovative and new contemporary ideas and resources decisions are made which are likely to make the organization customary in working with past taboos. This approach should be replaced by exploring new developments in the field, studying how the competitors or others in industry are utilizing such innovative technology or models and how when made customized for self will they lead to better results.

c) Delayed approach based as Loss Aversion –It may even happen that either due to some political dimension or having a practice of a lot of in and out groups or some inter-group rivalry or due to lack of professionalism, talented people, lack of direction and improper leadership styles the executives loose direction and vision while making decision in time and in right form. It is very important that in such cases the reason of non-performance is either due to previous failure, low profit, low team work or any other reason so that improvements can be brought in.

d) Over-Confidence-Sometimes tough the situation may be different and may be demanding something additional in terms of effort, thoughts, team work and difference in action as well but the executives every time based on their prior perception and work experience perceive it as same and take decision accordingly which may create difficulties .It may even be when managers either overestimate their capabilities or underestimate the serious results that may occur in form of risks.

e) Similarly focusing too much on happening of others in form of experiential happening of others either in a positive or in serious consequence and correlating it with own decision may also create a bias. Instead, effort should be made towards carefully surveying all possible push and pull factors both at the beginning and during implementation of any strategy and keep monitoring in consistent manner to avoid any trapping in making ineffective and illogical decisions.

Thus, an effective manager not only focuses on how well is the strategy is been designed but equal focus should be on how effectively at every step care is been taken to avoid any biasness in decision making at every level.
 


Ms. Vijit Chaturvedi
Assistant Professor
Lingaya's University
Faridabad

Dr. D.S Yadav
Assistant Professor
FMCA, RBS College
Agra
 

Source: E-mail July 28, 2011

          

Articles No. 1-99 / Articles No. 100-199 / Articles No. 200-299 / Articles No. 300-399 / Articles No. 400-499/ Articles No. 500-599
Articles No. 600-699 / Articles No. 700-799 / Articles No. 800-899 / Articles No. 900-1000 / Articles No. 1001-1100
Articles No. 1101-1200 / Articles No. 1201-1300 / Articles No. 1301 Onward / Faculty Column Main Page