Decision making is an essential activity in every organization, and managers use various approaches to make sound decisions. This article discusses the three primary approaches to decision making: the quantitative approach, decision-centered approach, and the managerial roles approach.
|1. Quantitative||Optimal solutions||Mathematical models, linear programming, integer and dynamic programming, queuing theory, games theory, replacement techniques, regression analysis, simulation, decision theory|
|2. Decision-centered||Satisfactory solutions||Bounded rationality, environment intelligence, identifying or designing alternative courses of action, avoiding new, uncertain alternatives, relying on well-tried alternatives|
|3. Managerial roles||Managerial roles||Interpersonal, informational, decisional|
1. The Quantitative Approach
The quantitative approach is a sequential process that involves using mathematical models to find optimal solutions to problems. It is best suited for structured decisions where most of the factors are controllable, and the manager has complete control over the decision-making process.
The steps involved in the quantitative approach are:
- Observing a problem and defining its scope.
- Formulating a hypothesis.
- Testing the hypothesis with the help of experiments.
- Verifying the solution by analogical reasoning.
- Conducting sensitivity analysis.
- Estimating the solution of the problem.
- Implementing the solution.
- Establishing control systems for feedback and review.
The quantitative approach helps managers define problems and separate the impact of problems from their causes. Various operations research and statistical techniques are useful in this approach, including linear programming, queuing theory, games theory, simulation, and decision theory.
These techniques are advantageous in suggesting the best solution to a problem without identifying all possible alternatives. However, managers should focus on the problem and seek its solution with the help of techniques while avoiding finding “right solutions” to “wrong problems.”
The Decision-Centered Approach
The decision-centered approach is based on the concept of bounded rationality and recognizes that the absolute rationality in decision making may not be achievable. This approach aims to work towards satisfactory solutions instead of optimal solutions.
The process involves the following steps:
- Environment intelligence for searching problems and opportunities; identifying the available informational inputs regarding the decision variables.
- Identifying or designing alternative courses of action.
- Making a choice among the alternatives designed in the preceding stage.
- The interdependence of the goals of different programs is generally avoided.
- Implementing the selected solution.
- Establishing control systems feedback.
In this approach, managers gather information regarding the internal and external environments, opportunities, and threats.
This information can be gathered using adhoc queries from information systems or through automatic reporting from modern business information systems.
The information is used to design the model for decision making, which can be automated using predetermined algorithms.
The process of decision making is complex for non-programmable decisions, but modern information systems can help by providing the possible impact of variables or a combination of variables.
The Managerial Roles Approach
The managerial roles approach is based on the concept that managers play various roles in decision making. Henry Mintzberg identified ten managerial roles that managers play in decision making.
These roles can be classified into three categories:
- Interpersonal roles, which involve interactions with people both inside and outside the organization.
- Informational roles, which involve the processing of information and its dissemination to others.
- Decisional roles, which involve making decisions.
|Interpersonal||Figurehead, Leader, Liaison|
|Informational||Monitor, Disseminator, Spokesperson|
|Decisional||Entrepreneur, Disturbance Handler, Resource Allocator, Negotiator|
The managerial roles approach is useful in decision making because it recognizes that managers have different roles to play, and decision making is not only about finding optimal solutions but also about interpersonal relationships and information processing.
Conclusion on Decision Making Appraoches
The three approaches to decision making – quantitative, decision-centered, and managerial roles – have their advantages and disadvantages, and managers should choose the approach that best suits the decision-making situation. The decision-making process is critical to the success of any organization, and managers must carefully evaluate all options before making a decision.