Decision-making techniques

1. Introduction

Decision making is the process by which the person must choose between two or more alternatives. Each and every one of us spends the days and hours of our lives having to make decisions. Some decisions have a relative importance in the development of our life, while others are gravitant in it.

For managers, the decision-making process is undoubtedly one of the biggest responsibilities. Decision-making in an organization is limited to a series of people who are supporting the same project. We must start by making a selection of decisions and this selection is one of the tasks of great importance.

It is often said that decisions are something like the engine of business and indeed, the proper selection of alternatives largely depends on the success of any organization. A decision can vary in trascendence and connotation.

Managers sometimes view decision making as their main job, because they constantly have to decide what needs to be done, who should do it, when and where, and sometimes even how it will be done. However, decision-making is only one step in planning, even when done quickly and with little attention or when it influences action for only a few minutes.

2. The penetration of decision making

Decision making in an organization invades four administrative functions that are: planning, organization, direction and control.

Administrative functions within the organization when making decisions

Planning

Selection of missions and objectives as well as the actions to fulfill them. This implies "Decision making".

• What are the organization's long-term goals? What strategies are best to achieve this goal? What should the short-term goals be? How high should individual goals be?

Organization

Establishment of the organization's structure and how individuals within it function.

• How much centralization should there be in the organization? How should positions be designed? Who is best qualified to fill a vacant position? When should an organization implement a different structure?

Address

This role requires managers to influence individuals to meet organizational and group goals.

• How do I handle a group of workers who seem to have low motivation? What is the most effective leadership style for a given situation? How will a specific change affect worker productivity? When is it appropriate to stimulate conflict?

Control

It is the measurement and correction of individual and organizational performance so that plans can be achieved.

• What activities in the organization need to be controlled? How should these activities be controlled? When is a deviation in performance significant? When is the organization performing effectively?

3. Rationality

Analysis that requires a goal and a clear understanding of the alternatives by which a goal can be achieved, an analysis and evaluation of the alternatives in terms of the desired goal, the necessary information and the desire to optimize.

What do we mean when we talk about rationality in decision making?

When an administrator is faced with a decision-making, in addition to understanding the situation that is presented, he must have the ability to analyze, evaluate, gather alternatives, consider the variables, that is, apply these techniques to find reasonable solutions; we can say then, that it is a decision-making based on rationality.

Limited or circumscribed rationality

Limited rational action due to lack of information, time or the ability to analyze alternatives in light of the goals sought; confusing goals; the human tendency not to take risks when making a decision. HEBERT SIMON, has called this SUFFICIENT SATISFACTION, that is, choosing a course of action that is satisfactory or good enough, given the circumstances. Although many managerial decisions are made with the desire to get ahead as safely as possible, most managers try to make the best decisions they can, within the limits of rationality and in accordance with size and nature. of the implicit risks.

Rational decision-making process

Of the existing processes for decision making, this is classified as “the ideal process”.

In its development, the administrator must:

1.- Determine the need for a decision.

The decision-making process begins with the recognition that a decision needs to be made. This recognition is generated by the existence of a problem or a disparity between a certain desired state and the actual condition of the moment.

2.- Identify the decision criteria.

Once the need to make a decision has been determined, the criteria that are important for it must be identified. Let's consider an example:

»A person is thinking of buying a car. The decision criteria of a typical buyer will be: price, model, two or more doors, size, national or imported, optional equipment, color, etc. These criteria reflect what the buyer thinks is relevant. There are people for whom it is irrelevant whether it is new or used; the important thing is that it meets their expectations of brand, size, image, etc., and that it is within the budget they have. For the other buyer, what is really important is that it be new, neglecting the size, brand, prestige, etc. "

3.- Assign weight to the criteria.

The criteria listed in the previous step are not of equal importance. It is necessary to weigh each one of them and prioritize their importance in the decision.

When the car buyer begins to weigh the criteria, he gives priority to those that, due to their importance, completely determine the decision: price and size. If the chosen vehicle has the other criteria (color, doors, optional equipment, etc.), but it exceeds the amount of what is available for purchase, or is smaller than what is required, then we find that the other criteria are secondary on the basis of others of transcendental importance.

4.- Develop all the alternatives.

Display the alternatives. The person who must make a decision has to draw up a list of all the alternatives available for the solution of a certain problem.

5.- Evaluate the alternatives.

The evaluation of each alternative is made by analyzing it with respect to the weighted criterion.

Once the alternatives have been identified, the decision maker has to critically evaluate each of them. The advantages and disadvantages of each alternative are evident when compared.

6.- Select the best alternative.

Once the best alternative was selected, the end of the decision-making process was reached. In the rational process, this selection is quite simple. The decision maker only has to choose the alternative that had the highest score in step five.

Step six has several assumptions, it is important to understand them in order to determine the accuracy with which this process describes the real process of administrative decision making in organizations.

The decision maker must be totally objective and logical when making them. You must have a clear goal and all actions in the decision-making process consistently lead to the selection of the alternative that will maximize the goal. We are going to analyze decision making in a totally rational way:

• Goal-oriented.- When decisions must be made, there should be no conflicts about the end goal. Achieving the ends is what motivates us to decide the solution that best suits specific needs. All options are known.- The decision maker has to know the possible consequences of his decision. It also has clear all the criteria and can list all the possible alternatives. The preferences are clear.- It is assumed that you can assign numerical values ​​and establish an order of preference for all possible criteria and alternatives.

4. The creative process

The creative process is not usually simple or linear. Instead, it is generally composed of four phases, superimposed and interacting with each other:

1. Unconscious exploration, intuition, discernment and logical formulation.

The first phase, unconscious exploration, is difficult to explain because it occurs outside the limits of consciousness. It usually involves the abstraction of a problem, the mental determination of which is likely to be very vague. However, managers working under intense time pressures often make premature decisions rather than dwell on vague and poorly defined issues.

The second phase, intuition, serves as a link between the unconscious and consciousness. This stage can involve a combination of seemingly contradictory factors. In the 1920s, for example, Donaldson Brown and Alfred Sloan of General Motors conceived the idea of ​​a decentralized divisional structure with centralized control, concepts that would appear to oppose each other. However, this idea makes sense if the underlying principles of 1) hold the general manager of each division responsible for operations and 2) maintain centralized control of certain functions at the company's headquarters. The intuition of two great business leaders was necessary to verify the possibility of interaction between these two principles in the administrative process.

Intuition takes time to work. It involves the detection of new combinations and the integration of diverse concepts and ideas for individuals. For this it is necessary to deepen the analysis of a problem. Intuitive thinking can be induced by techniques such as brainstorming and synectics, which will be discussed later.

The discernment, third stage of the creative process is a result mainly of hard work. To develop a useful product, a new service, or a new process, for example, many ideas are necessary. The interesting thing about it is that discernment can result from the concentration of ideas on issues other than the problem at hand. Also, the emergence of new insights can be momentary, so effective managers often have a pencil and paper handy to jot down their creative ideas.

The last phase of the creative process is the logical formulation or verification. Discernment must be put to the test of logic or experimentation. This is accomplished by persistently reflecting on an idea or asking others for criticism. Brown and Sloan's idea of ​​decentralization, for example, had to be tested in organizational reality.

Techniques to promote creativity

Creativity can be acquired. Creative ideas are often the result of great efforts, which is why there are several techniques to cultivate them, especially in the decision-making process. Some of them focus on group interactions, while others concern individual actions. In representation of the existing techniques we will refer to two of the most common; brainstorming and synectics.

Brainstorming

One of the best-known techniques to facilitate creativity was developed by Alex F. Osborn, who has been called the "father of brainstorming." The purpose of this method is to promote problem solving by finding new and unusual solutions. What is sought in a brainstorming session is precisely a multiplication of ideas. The rules are as follows:

• Do not criticize any idea The more extreme the ideas, the better Encourage the number of ideas produced Encourage the progressive improvement of ideas

Brainstorming, which emphasizes groupthink, was widely accepted after its appearance. However, initial enthusiasm waned when research showed that individuals can develop better ideas working alone than in groups. However, new research has shown that the group method is effective in certain situations. This may be the case when the information must be distributed among several people or when, even if it is deficient, a group decision is preferable to an excellent personal decision, which, for example, the individuals in charge of implementing it could be opposed. Likewise, the acceptance of new ideas is usually greater when a decision is made by the group in charge of its implementation.

Synectic

Originally known as the “Gordon technique” (since it was created by William J. Gordon), this system was later modified and called synectic. According to him, the members of the synectic team are carefully selected according to their aptitude for solving a problem, which can involve the entire organization.

The group leader plays an important role in the application of this method. In fact, only he knows the specific nature of the problem. Their role is to carefully narrow and direct the discussion without revealing the problem at hand. The main reason for this is to prevent the group from reaching a premature solution. This system involves a complex series of interactions for the emergence of a solution, often the invention of a new product.

Stages of Decision Making

1. Identification and diagnosis of the problem Generation of alternative solutions Selection of the best alternative Evaluation of alternatives Evaluation of the decision Implementation of the decision Identification and diagnosis of the problem:

We recognize in the initial phase the problem we want to solve, taking into account the current state with respect to the desired state. Once the problem is identified, the diagnosis must be made and after this we can develop corrective measures.

Generation of alternative solutions

The solution of the problems can be achieved in several ways and not only select between two alternatives, hypotheses can be formulated since with the alternative there are uncertainties.

Evaluation of alternatives

The third stage involves determining the value or suitability of the alternatives that were generated. Which solution will be the best?

Managers must consider different types of consequences. Of course they should try to predict the effects on financial or other development measures. But there are also other less defined consequences that must be addressed. Decisions set a precedent and you have to determine whether this will be a help or a hindrance in the future.

Of course, it is not possible to predict the results with all precision. Then they can generate contingency plans, that is, an alternative course of action that can be implemented based on the development of events.

Selection of the best alternative

When the administrator has considered the possible consequences of his options, he is in a position to make the decision. You must consider three very important terms. These are: maximize, satisfy and optimize.

• Maximize: is to make the best possible decision. Satisfy: it is the choice of the first option that is minimally acceptable or adequate, and in this way a goal or desired criterion is satisfied. Optimize: It is the best possible balance between different goals.

Decision implementation

The process does not end when the decision is made; it must be implemented. It may well be that those who participate in the choice of a decision are those who proceed to implement it, as on other occasions they delegate this responsibility to other people. There must be a total understanding of the choice of decision-making itself, the reasons that motivate it and above all there must be a commitment to its successful implementation. To this end, the people who participate in this phase of the process should be involved from the first stages that we have mentioned above.

Below we will cite the steps that managers should consider when planning their execution:

• Determine how things will look once the decision is fully working. Chronological order (if possible with a flow chart) of the steps to achieve a fully operational decision. Consider available resources and activities necessary to put each step into practice. Consider the time each of the stages will take. Assignment of responsibilities to specific people for each stage.

We can be sure that when a decision is taken, it will probably generate certain problems during its execution, therefore managers must dedicate enough time to recognize the inconveniences that may arise as well as see the potential opportunity that these may present. can represent. In this way, we could say that it is essential that managers ask themselves:

• What problems could this action cause, and what could we do to prevent it? What unintended benefits or opportunities could arise? How can we make sure they happen? How can we be prepared to act when opportunities present themselves?

Decision evaluation

"Evaluating the decision" is part of the final stage of this process. All the information that tells us how a decision works is collected, that is, it is a feedback process that could be positive or negative. If the feedback is positive, then it indicates that we can continue without problems and that the same decision could even be applied to other areas of the organization. If, on the contrary, the feedback is negative, it could be that: 1) perhaps the implementation requires more time, resources, efforts or thought or 2) it may indicate that the decision was wrong, for which we must return to the beginning of the process (re) definition of the problem. If this happens,no doubt we would have more information and probably suggestions that would help us avoid mistakes made on the first try.

5. Barriers to effective decision making

Monitoring and complete execution of the six-stage decision-making process is the exception rather than the rule in managerial decision-making. However, according to research, when managers use these rational processes, their decisions are better. Managers who make sure to participate in those processes are more effective.

Why don't people participate automatically in these rational processes? It is easier to neglect them or execute them improperly. Perhaps the problem was not well defined, or the goals were not precisely identified. Perhaps not enough solutions will be generated, or they may be incompletely evaluated. It is possible that a choice is made that is satisfying and not one that is maximizing. The implementation could have been planned or executed, or perhaps, the monitoring was inadequate or non-existent. In addition to that decisions are influenced by psychological prejudices, time pressures and social realities.

Psychological biases

Sometimes decision makers are far from objective in the way they collect, evaluate and apply the information to choose. People have biases that interfere with objective rationality. The examples that follow represent only a few of the many subjective biases that have been documented.

Control illusion: it is to believe that one can influence situations even if one does not have control over what is going to happen. Many people gamble because they believe that they have the ability to beat the odds, even when most cannot. When it comes to business, overconfidence can result in failure for the organization, as decision makers ignore risks and therefore fail to objectively assess the chances of success.

Perspective effects: refer to the way in which problems or decision alternatives are formulated or perceived and the way in which these subjective influences can be imposed on objective facts.

In decision making, the future should not be underestimated. When, for example, we talk about a decision-making related to the costs of an organization, when evaluating the alternatives, we should not give more importance to short-term costs and benefits than to long-term ones, since considering only those of Short term could influence to set aside those long term variables, which could also result in negative situations for the organization. Precisely the dismissal of the future is, in part, the explanation for government budget deficits, environmental destruction and decaying urban infrastructure.

Quite the contrary, from organizations that place great value on long-term considerations for decision-making, we can cite the Japanese who are recognized for the success of their organizations.

Time Pressures: In today's fast-changing business environment, the prize is for quick action and keeping pace. More conscientious business decisions can become irrelevant and even disastrous if managers take too long to do so.

How can managers make decisions quickly? From the North American example, we could mention the lack of demanding analysis (not being too vigilant), suppressing the conflict and making decisions on your own without consulting other managers. This form can speed up decision making but reduces the quality of it.

Is it possible for managers to make quality and timely decisions under pressure? Taking the example of microcomputer companies (a high-tech, fast-moving company) as a reference, there were some important differences between fast and slow-acting companies. The former had significant competitive advantages, without sacrificing the quality of their decisions.

What tactics are the microcomputer companies employing in this case?

• Instead of planning in the long term and with futuristic information, they work with current information or what is also called real-time information, which does not generate delays. The most effective and efficient people are involved for decision making, within the organization. They are based on highly trusted and expert people in the field, which allows them to act safely and quickly. They value the different opinions, being aware that when the differences are not resolved, they must choose the final decision of the boss.

6. Personal qualities for decision making

Undoubtedly there are certain qualities that make decision makers good or bad.

Four are the qualities that are most important when analyzing the decision maker: experience, good judgment, creativity and quantitative skills. Other qualities may be relevant, but these four make up the fundamental requirements.

Experience

It is logical to assume that a command's ability to make decisions grows with experience. The concept of seniority in an organization with those individuals who have the longest time of service, is based on the value of experience and therefore receive a higher salary. When a candidate is selected for a position in the organization, experience is a very important chapter in the decision. Past successes or errors form the basis for future action, it is assumed that previous errors are potential for fewer future errors. Successes achieved in earlier times will be repeated. We assume.

An experience of 10 years implies a greater range of response than a person with an experience of 5 years can have. But be careful that the experience of 10 years is not that of one, repeated ten times.

Experience plays a very important role in decision-making. When a controller faces a problem, it draws on its experience to be able to solve it in a way that it knows has previously solved it.

For poorly structured or new situations, experience can have advantages and disadvantages. The main disadvantage is that the lessons of experience may be completely inappropriate for the new problem, resulting in the wrong decision. But it can also be a great advantage, as it provides elements to differentiate between well-structured and poorly structured situations.

Good judgement

The term judgment is used to refer to the ability to intelligently evaluate information. It is made up of common sense, maturity, reasoning ability and the experience of the decision maker. Therefore judgment is assumed to improve with age and experience.

Good judgment is demonstrated through certain skills to perceive important information, weigh its importance, and evaluate it. The judgment is more valuable in the handling of poorly structured or new problems, because precisely from that judgment the decision maker will make determinations and apply criteria to understand the problem and simplify it, without distorting it with reality.

A judgment is developed as follows: based on the information available and on their own previous experience, the decision maker establishes parameters made up of: the facts, opinions and knowledge in general.

Creativity

Creativity designates the ability of the decision maker to combine or associate ideas in a unique way, to achieve a new and useful result.

The creative decision maker is able to grasp and understand the problem more broadly, even seeing consequences that others overlook. However, the greatest value of creativity is in the development of alternatives. They are creative and can generate enough ideas to find the shortest and most effective way to the problem.

Quantitative skills

This is the ability to use techniques presented as quantitative methods or operations research, such as: linear programming, waiting line theory and inventory models. These tools help managers make effective decisions. But it is very important not to forget that quantitative skills should not and cannot replace good judgment in the decision-making process.

Limitations for decision makers

Organizations, or more precisely, the people who make the important decisions, cannot do what they want. They face different limitations: financial, legal, market, human and organizational, which inhibit some actions. Capital or product markets can make it impossible to start a new business when it is expensive. Legal restrictions can hamper the international business activities in which a company can participate. Unions can successfully defeat a contract proposed by management, contracts can prevent certain managerial actions, and managers and investors can block a takeover attempt.

Suppose you have a great idea that will provide a revolutionary service for a bank's customers. You will not be able to implement it immediately. You will have to sell it to the people who can give it the go-ahead and also to those who will help you carry out the project. You can start by convincing your boss. Then you and your boss will have to face a vice president and will probably have to sell the idea to the president later. People's opinions and suggestions should be heard at all stages and you may even want to consider including them in the concept of your original idea. At the end of the day, your proposal must be accepted and satisfy everyone.

Human side of the model design process

In large organizations, a decision maker is valuable only to the extent that he or she recognizes the relationship of his decision to those of other decision makers within the organization because it may make more or less or no difference within the organization or it may be superseded. However, in small businesses, the decision maker can be success or ruin, or it can be very difficult to replace. Here are some helpful and practical aphorisms to keep in mind when practicing applied management science.

1. Succeeding is not enough. Others must fail, too. No need to turn off the other's light for your own to shine. Game components: Players, Added Values, Rules, Tactics, and Scope. One player's product is a complement to ours if customers value our more product when they have the other player's product than when they only have our product.A player is our competitor if customers value our product less when they have the other player's product than when they have only our product.A player's product is a complement to our if it is more attractive for a supplier to be our supplier when he is also the supplier of the other player than when he is only our supplier.

A player is our competitor if it is less attractive for one supplier to be our supplier when he is also the other's supplier.

Decision Ingredients

The art of decision making is based on five basic ingredients:

a) Information:

These are collected both for the aspects that are in favor and against the problem, in order to define its limitations. However, if the information cannot be obtained, the decision must then be based on available data, which falls into the category of general information.

b) Knowledge:

If the decision maker has knowledge, either of the circumstances surrounding the problem or of a similar situation, then this can be used to select a favorable course of action. In case of lack of knowledge, it is necessary to seek advice from those who are informed.

c) Experience:

When an individual solves a particular problem, either with good or bad results, this experience provides information for the solution of the next similar problem. If you have found an acceptable solution, the more likely you are to repeat it when a similar problem arises. If we lack experience then we will have to experiment; but only in the case that the consequences of a bad experiment are not disastrous. Therefore, the most important problems cannot be solved with experiments.

d) Analysis:

You cannot talk about a particular method to analyze a problem, there must be a complement, but not a replacement for the other ingredients. In the absence of a method to mathematically analyze a problem, it is possible to study it with different methods. If these other methods also fail, then intuition must be relied upon. Some people laugh at intuition, but if the other ingredients of decision making don't point a way to go, then this is the only option available.

e) Judgment:

Judgment is necessary to combine information, knowledge, experience and analysis in order to select the appropriate course of action. There are no substitutes for good judgment

7. Importance of decision making

It is important because by using good judgment, Decision Making tells us that a problem or situation is valued and deeply considered to choose the best way forward according to the different alternatives and operations.

It is also of vital importance for the administration since it contributes to maintaining the harmony and coherence of the group, and therefore its efficiency.

In Decision Making, considering a problem and reaching a valid conclusion means that all the alternatives have been examined and that the choice has been correct. Such logical thinking will increase confidence in your ability to judge and control situations.

One of the most competitive research and analysis approaches to decision making is operations research. Since this is an important tool for managing production and operations.

Decision making is considered an important part of the planning process when an opportunity and a goal are already known, the core of planning is really the decision process, therefore within this context the process that leads to making a decision. decision could be visualized as follows:

1. Elaboration of premises Identification of alternatives Evaluating alternatives in terms of the desired goal Choosing an alternative, that is, making a decision.

8. Decision-making and its implementation

It is often asked whether organizations have rules and regulations related to a process by which a manager can achieve objectives, policies and strategies.

While there is no single set of rules for any of these functions, they are all related to different forms of decisions, so it is possible to create a list of steps that apply to all circumstances in which decisions are made.

We can then talk about a basic process known as the decision-making circuit or steps:

Decision Characteristic

There are five characteristics of decisions:

1. Future effects:

It has to do with the extent to which the commitments related to the decision will affect the future. A decision that has a long-term influence can be considered a high-level decision, while a decision with short-term effects can be made at a much lower level.

2. Reversibility:

It refers to the speed with which a decision can be reversed and the difficulty of making this change. If reversing is difficult, it is recommended to make the decision at a high level; But if reversing is easy, it requires making the decision at a low level.

3. Impact:

This characteristic refers to the extent to which other areas or activities are affected. If the impact is extensive, it is indicated to make the decision at a high level; a single impact is associated with a decision made at a low level.

4. Quality:

This factor refers to labor relations, ethical values, legal considerations, basic principles of conduct, company image, etc. If many of these factors are involved, the decision needs to be made at a high level; if only a few factors are relevant, it is recommended to make the decision at a low level.

5. Periodicity:

This element answers the question of whether a decision is made frequently or exceptionally. An exceptional decision is a high-level decision, while a decision that is made frequently is a low-level decision.

Steps in the decision-making process

a) Determine the need for a decision:

The decision-making process begins with the recognition of the need to make a decision, it is generated by a problem or a disparity between a certain desired state and the actual condition of the moment.

b) Identify the decision criteria:

Once the need to make a decision has been determined, the criteria that are important for it must be identified. Let's consider an example.

“A person thinks about acquiring a car, the decision criteria of a typical buyer will be: price, model, two or more doors, national or imported size, optional equipment, color, etc. These criteria reflect what the buyer thinks is relevant. There are people for whom it is irrelevant whether it is new or used; the important thing is that it meets their expectations of brand, size, image, etc., and is within the budget they have. For the other buyer, what is really important is that it is new, neglecting the size, brand, prestige, etc. "

c) Assign weight to the criteria:

The criteria listed in the previous step do not matter. It is necessary to weigh each one of them and prioritize their importance in the decision.

When the car buyer begins to weigh the criteria, he gives priority to what, due to its importance, completely conditions the decision: price and size. If the chosen vehicle has the other criteria (color, door, optional equipment, etc.), but it exceeds the amount of what is available for purchase or is smaller than that required for its intended use, then we find that the other criteria are relevant on the basis of others of transcendental importance.

d) Develop all the alternatives:

It is the basis of decision-making and is nothing more than displaying the alternatives. The decision maker has to make a list of all possible alternatives that could be used to solve the problem.

e) Evaluate the alternatives:

Once the alternatives have been identified, the decision maker has to critically evaluate each of them. The advantages and disadvantages of each alternative are evident when compared.

The evaluation of each alternative is carried out by analyzing it with respect to the weighted criterion.

f) Select the best alternative (Decision making):

Once the best alternative is selected, the end of the decision-making process is reached, in the rational process. This selection is quite simple. The decision maker only has to choose the alternative that had the highest score in step five. The example would result in the purchase of a Mercedes, with minimal differences with other brands.

The decision maker must be totally objective and logical when making them, he must have a clear goal and all actions in the decision-making process consistently lead to the selection of those alternatives that will maximize the goal.

Types of decisions

Decisions can be divided into two categories.

a) Scheduled Decision:

They are programmed to the extent that they are repetitive and routine, as well as to the extent that a definitive method has been developed to handle them. As the problem is well structured, the command does not need to go through the work and expense of carrying out a complete decision process.

These programmed decisions have guidelines or procedures (sequential steps to solve a problem), rules that guarantee consistency in disciplines and with a high level of justice, apart from a policy, which are the guidelines to channel the thinking of the command in a specific address.

b) Unscheduled Decision:

"The restructuring of an organization" or "closing an unprofitable division", are examples of unscheduled decisions, Also "the creation of a market strategy for a new product".

9. Decision-making under conditions of certainty, uncertainty and risk

Virtually all decisions are made in an environment of certain uncertainty. However, the degree varies from relative certainty to great uncertainty. In decision making there are certain implicit risks.

In a situation where there is certainty, people are reasonably sure about what will happen when they make a decision, they have information that is considered reliable, and cause and effect relationships are known.

On the other hand, in a situation of uncertainty, people only have a very poor database. They do not know if they are reliable or not and are very uncertain about the possible changes that the situation may undergo. Furthermore, they cannot evaluate the interactions of the different variables, for example a company that decides to expand its operations to another country may know little about the culture, laws, economic environment and policies of that nation. The political situation is often so volatile that even experts cannot predict a possible change in them.

In a risk situation, factual information may be available, but it may be incomplete. To improve decision making, the objective probabilities of an outcome can be estimated, using, for example, mathematical models. On the other hand, subjective probability, based on judgment and experience, can be used. Fortunately, there are several tools available to help administrators make more effective decisions.

Distinguish the quantitative and qualitative bases for decision making

The range of techniques extends from hunches at one extreme to complex mathematical analysis at the opposite extreme.

From a practical point of view there is neither a best technique nor a combination that should be used in all circumstances. Selection is individual and is generally dictated by the manager's background and knowledge and by available resources.

1. Non-quantitative bases:

Non-quantitative means are useful, not only for problems that refer to objectives, but also for problems that deal with the means of achieving objectives.

In application, non-quantitative bases are highly personal, widely known, and are considered by many to be the natural way to make a decision; there are four bases: intuition, facts, experiences and opinions considered

2. Quantitative bases:

This is the ability to use techniques presented as quantitative methods or operations research, such as linear programming, waiting line theory, and inventory modeling. This tool helps managers make effective decisions, but it is very important not to forget that quantitative skills should not, and cannot replace, good judgment in the decision-making process.

They have many different means that involve measurements. The development and application of quantitative techniques increased in the mid-1940s. This impetus was mainly due to improvements in measurements, the availability of computers, increased interest in applied mathematics, and a desire for more logical methods of analysis. current administrative problems.

For the most part when using quantitative methods for decision making, the emphasis is on the means, or the best way to achieve the stated goal.

The final result or goal is usually given, for example as:

• Minimize the cost for activities Maximize the total return for the company.

2.1. Considered opinions:

This particular basis is distinguished by the use of the logic behind the logical decision that is explanatory and that is derived from a careful analysis of the situation, in addition there is quantification of the tentative decision. To do this, statistics are collected and decisions are related.

In this analysis we get involved with certain theories or techniques that we will name below:

2.2. Linear programming:

It is a decision technique that helps determine the optimal combination of limited resources to solve problems and achieve organizational objectives.

To be applicable, Linear Programming must meet the following requirements:

1. An objective has to be optimized Variables or forces affecting results have direct or straight-line relationships There are obstacles or restrictions on the relationships of variables.

Without the constraints of Linear Scheduling include maximizing production, minimizing distribution costs, and determining optimal inventory levels.

2.3. Games theory:

Game theory was developed by scientists Neumann and Morgenster.

This implies the use of the minimum thinking strategy; The course of action that will cause partner A is determined, as well as the minimum of inconvenience, and it can be followed as long as her competitors execute the most astute action possible to do so. In this way, partner A's planning becomes more beneficial for partner A. They can be somewhat limited and consequently the decision will be based on too narrow a background, it is also possible to exaggerate the traditional one and maintain a status that is too rigid.

Although generally viewed as an aid to managerial training, business games can be viewed as a type of quantitative decision-making technique.

Decisions are expressed in quantitative terms, such as a certain number of sales obtained, units purchased, etc.

The game provides the manager with practice, knowledge and the opportunity to improve administrative actions.

2.4. The Monte Carlo Technique:

It is a simplified simulation method, but it also includes probability factors. The simulation is guided by a random sampling to take into account the probability of the event happening.

Random sampling is used to simulate natural events in order to determine the probability of the events under study.

A table of random numbers is used to obtain the random sample. Monte Carlo is a means of testing to see what would happen when certain events, normal and abnormal, occur.

This approach is productive and tells what is likely to happen in actual events without looking at existing testable events. The possible applications are very numerous.

They can be used to solve problems with these typical questions:

• What is the probability of an event, or combination of events, occurring in a given process? What decision should be made based on the possible alternatives?

2.5. Waiting lines (Rows):

Administrative problems arise due to:

1. Employees, machines or materials are made to wait due to insufficient facilities to handle them immediately. Facility utilization occurs at less than maximum due to the sequence of the arrival of resources using the facilities.

There are wasted time, unused labor, and excessive costs caused by waiting lines or queues. Minimizing these losses is the goal of this technique.

The rows are related to flow; Example: material waiting to be processed by a machine, airplanes circling over an airport awaiting instructions, include the flow of the combination and the materials.

3. Qualitative bases:

Undoubtedly there are certain qualities that make decision makers good or bad. The qualities that are most important when analyzing the decision maker are:

3.1. Experience:

It is logical to assume that a command's ability to make decisions grows with experience. The concept of seniority in an organization with those individuals who have the longest time of service, is based on the value of experience and therefore receive a higher salary. When a candidate is selected for a position in the organization, experience is a very important chapter in the decision. Past successes or mistakes form the basis for future action; previous errors are assumed to be the potential for minor future errors. Likewise, we assume that the successes achieved in earlier times will be repeated.

Experience plays a huge role in decision-making, whether for poorly structured or new situations.

3.2. Good judgment and intuition:

The term judgment is used to refer to the ability to intelligently evaluate information. It is made up of common sense, maturity, reasoning ability and the experience of the decision maker, in addition to which it improves with age and experience. Decision-making based on intuition is characterized by the use of internal hunches, the "guts" of the person who comes to a decision. The suggestions, influences, preferences and psychological format of the individual who decides play a very important part; the subjective element is vital.

Good judgment is demonstrated through certain skills to perceive important information, weigh its importance and evaluate it, it is very likely that the decision maker is unconsciously influenced by past knowledge, training and background.

In general, the decision maker by intuition or good judgment is an activist, does not maintain a fixed pattern of decisions, moves very quickly, questions situations incisively and finds unique solutions to difficult problems.

3.3. Acts:

A decision must be based on adequate facts, it is widely accepted. When facts are used the decision has its roots, so to speak, in objective data, this implies that the premises on which the decision is based are solid and intensely applicable to the particular situation.

Information as a management tool has acquired a high status. Activities in this area are well defined and use highly sophisticated techniques and equipment.

Complete and objective information is an ideal to be sought, but rarely achieved frequently. A manager is forced to make a decision without all the facts that he might consider appropriate.

When we proceed to apply the facts in their correct perspective, applying the appropriate steps and extracting the essential information, it introduces the subjectivity of the decision maker and requires skill, training and dexterity, totally apart from the simple gathering of all the available facts, therefore It generally takes imagination, experience, and convictions to interpret facts from your own perspective and use them to advantage.

3.4. Creativity:

Creativity designates the decision-maker's ability to combine or associate ideas in unique ways to achieve a new and useful result. The creative decision maker is able to grasp and understand the problem in a broader way, even to see the consequences that others overlook, however the greatest value of creativity is in the development of alternatives.

3.5. Other Qualitative Considerations

The management scientist is not the decision maker.

The decision maker must incorporate into the analytical model of the management scientist other necessary perspectives such as organizational, environmental, conflictive, historical, dynamic, and psychological aspects of the problem. For example, knowing how to remove any "invisible" barriers (also called "Chinese Walls") between the different departments of an organization.

When describing reality, you must be careful not to interject your own wishes. For example, describing nature as having human features is a modeling process called the "pathetic fallacy." It has been proven that as far as we can discover, nature is indifferent to our values ​​and can only be understood by ignoring our notions of good and bad. The Universe may have a goal, but nothing we know indicates that that goal has any similarity to ours.

Establish relationships between decision-making and the role of management

Categories of Decision-Makers

According to Edward Spanger and Max Niemeyer, in their publication Types of Men, they argue that some decision-makers are so predictable in their way of solving a problem that they can be categorized as follows:

• The Economist, who is only interested in what is useful and practical; The Aesthetics, whose most important values ​​are in harmony and individuality, pomp and power; The Theorist, interested in discovering the truth for herself.; in diversity and rationality. The Social, who loves people, considers people as ends and is kind, sympathetic and not selfish. The Politics, which is interested above all in power, influence or renown. The Religious, whose most important value is the greatest spiritual experience, which is absolutely satisfactory for her; she is an ascetic who seeks experience through self-denial and dedication.

10. Importance of group decision making

Although the supervisor almost always makes decisions alone, there are times when he must take advantage of having his group of subordinates to make certain decisions.

Decision-making in modern organizations are carried out in groups or working committees, they are individualized at the moment they become part of the well-structured or standard ones.

These individual or group decisions each have their advantages and disadvantages, which have a decisive influence on the role of the management of our organizations.

We are going to analyze the advantages and disadvantages of working in groups or committees:

Advantages:

• More complete information and knowledge: Logically, a group manages to collect more information, having access to more information sources than a single individual, regardless of their education and experience. Therefore, groups can offer greater contributions, both in quantity and diversity, for decision making Increase the acceptance of a solution or the variety of points of view: Many decisions fail after an opinion is chosen, due to that a sector of people does not accept it as a possible solution, each of its members has their own point of view that differs, to some extent, from that of the others, as a result, the number and types of options are greater than those of the individual who works alone. Group participation facilitates broad discussion and more participatory acceptance,It is possible that there are divergences in the agreements, but it is proposed and its discussion is allowed for when it is already accepted, it is a commitment of a whole group. It is difficult for those attending the discussion group to attack or hinder a decision that they helped develop. Group decisions increase acceptance of the final solution and facilitate its implementation. Increase Legitimacy: Democratic methods are accepted by all components of society. When the process is group, all the additions of democratic ideals intervene. If the decision maker does not consult others before taking one of them, the fact of the power that he has does not exempt him from being an authoritarian and arbitrary person. Group decisions do not have the magic wand of perfection,but without a doubt they are the least dangerous and therefore those with the lowest level of error Reduction of communication problems: Since the group participates in decision-making, all its members are aware of the situation, therefore the start-up of the solution usually goes smoothly. The questions, objections, and obstacles that you normally face in implementing a decision often disappear when the decision is the result of group participation.the objections and obstacles that the implementation of a decision normally faces often disappear when the decision is the result of group participation.the objections and obstacles that the implementation of a decision normally faces often disappear when the decision is the result of group participation.

Disadvantages:

• They require a lot of time: Assembling the group takes time, but with a good organization, the meetings will be scheduled in advance in a timely period of time (it varies according to the organization and should not be less than two weeks). The result is that groups take more time to reach a decision than a single individual.Acceptance pressures: Although all group members are supposed to feel free to express their opinions, suggestions and recommendations, it is nonetheless It is true that sometimes there is pressure for everyone to come together and abide by the general consensus, often called "groupthink." This pressure can cause the group to overlook positive advice or suggestion from some of those present.Non-conforming people are pressured to conform and adhere to the majority opinion; there are social pressures in groups. The desire of the members of the group to be accepted and therefore to be protagonists, can result in an exchange of views conditioned on wishes for a demonstration of leadership. Finally, the same result will be reached that must necessarily be accepted by all to be valid.Ambiguous responsibility: The members of a group have to share responsibility, therefore individuality is diluted, giving great value to the results.: On certain occasions the group stagnates and is unable to reach an agreement on which solutions to recommend. Forced to make a decision, members are encouraged to compromise or give up,accepting a different version of your solution. This drawback is very common when the group is subdivided into smaller groups, each of which supports a different solution.

How to make group decision-making work

Group decision-making can be used very efficiently if the supervisor handles the situation properly. One of the most important factors is to win the support of group members; pointing out the value of their contributions in solving the problem. A second very useful approach is to give each member of the group specific elements to think about and work on, so that they can recognize their contributions; also create an environment where people can express themselves openly and frankly and that encourages both creative input and discussion about the faults or mistakes that could be made. The latter is especially important to avoid the emergence of Group Thought.

Management must make difficult decisions and that makes it impossible to make everyone happy

Moments like this add new stresses and demands to everyone at the company. Management has to make difficult decisions and unpopular actions. This is not easy or pleasant. Also, that doesn't show that management is vile and insensitive.

Watching a large company go through a major transition and change is like watching the participants in a card game. Some win, some lose, and some tie. Like the card dealer, management must "work for the good" of the organization, assuming that in the process, some people will be hit harder than others.

If you were the person in charge you would face the same dilemma.

It's easy to sit back and criticize the way top management does things. It's also easy to accuse management of not caring about people. When you don't like what is happening, the natural tendency is to look for someone to blame.

But instead of pointing out your superiors, consider that they are only doing what they should be doing. It is very common to care deeply for others, and still not be able to give them everything they want.

"Running a company is easy when you don't know how, but very difficult when you know" Price Pritchett

11. Conclusion

A Manager has to become familiar with the basic decision-making circuit and its ingredients. Once these basic ingredients are recognized, attention must be paid to the character of the decision maker, both individually and as a group. Because most decisions have an effect on people, the Manager cannot ignore the influence of human relationships on a decision, especially when selecting a technique to make. The diagramming of a given problem can take different forms and can be an invaluable aid in gathering and displaying the particular problem or the parameters of the decision. A basic knowledge of the theories of probability and statistics will help in the graphical presentation of this information.

However, once all the information has been processed and at the same time understood what the basic building blocks of decision making are, one more ingredient is still required for a Manager to make the right decisions. The person who does not want to take risks will never succeed as a Manager. A manager must have the good judgment to know how much information to collect, the intelligence to direct the information and, most important of all, the courage to make the decision that is required when it carries a risk. The personal quality of the courage to accept responsibility for a decision (good or bad) separates ordinary people from those who make excellent decisions.

12. Bibliography

• MURDICCK ROBERT, Administrative information systems. Editorial Prentice-Hall Hispanoamérica, SA Mexico.DICHTER ERNESTE, Are you a good manager? Editorial McGraw Hill Latinoamericana, SAMOODY PAUL E., Management decision making. Editorial McGraw Hill Latinoamericana, SAHALL RICHRD H., Organizations. Editorial Prentice-Hall Hispanoamérica, SA México.TERRY & FRANKLIN, Principles of Administration. Editorial Pañazo SRL, Caracas, Venezuela.COHEN ASÍN, Information Systems for business. Third edition. Mc Graw Hill, SA México.GIBSON IVANCEVICH DONELY, Las Organizaciones. Eighth edition. McGraw Hill. Barcelona (Spain).LEON ORFELIO, Making difficult decisions. Second edition. McGraw Hill Publishing. Madrid (Spain). GOMEZ CEJA GUILLERMO, Business Planning and Organization. Eighth Edition McGraw Hill México.

13. Glossary

1. Administrators: People who carry out the task and functions of administering, at any level and in any type of company Committee: Group of people who, together, are entrusted with any matter for the purposes of information, advice, exchange ideas or decision-making. Communication: Transfer of information from one person to another, as long as the receiver understands it. Creativity: Ability to develop new concepts, ideas and solutions to problems. Efficiency: Achievement of objectives; achievement of the desired effects. Efficiency: Achievement of the ends with the least amount of resources; achieving goals at the lowest cost or other unintended consequences Strategy:Determination of the purpose (or mission) and basic long-term objectives of a company and adoption of courses of action and allocation of the necessary resources to achieve these purposes Operations Research: Use of mathematical models to reflect variables and constraints In a situation and its effect on a selected goal, it is usually based on the use of optimization models; the application of the scientific method to a problematic situation with the idea of ​​providing a quantitative basis to arrive at an optimal solution in terms of the goals sought Leadership: Influence, art or process of influencing people to strive voluntarily and with enthusiasm for the achievement of the goals of the group.Microcomputer: Equipment smaller than the minicomputer;It can be a desktop, home, personal, laptop or a computer for a small business system Mission: Basic function or task of a company or unit or one of its departments Objectives: Purposes towards which it is directed activity; planning end points Organization: Concept used in various ways, such as 1) systems or pattern of any group of relationships in any kind of operation, 2) the company itself, 3) cooperation of two or more people, 4) the behavior of the members of a group and 5) the intentional structure of roles in a “formally organized” company. Policies: Statements or general interpretations that guide thinking during decision-making;the essence of the policies is the existence of a certain degree of discretion to guide decision-making. Planning or planning premises: Planning assumptions, expected environment in which plans will operate; they can be environmental forecasts, planning, or basic policies and existing plans that will influence any given plan. Procedures: Plans that establish a method for managing future activities. They are chronological series of required actions, guides for action, not for thought, that detail the exact way in which certain activities should be carried out.Productivity: Production-input ratio in a period, taking into account the quality.Rules: Standards that dictate action or abstention, but that do not allow discretion; for example, "definitely no smoking."Responsibility: Obligation that subordinates owe to their superiors regarding the exercise of the authority that was delegated to them as a way to achieve the expected results. Feedback: Input of information to a system that transmits messages of the operation of the system to indicate if it operates as planned; information related to any type of planned operation, addressed to the person responsible for its evaluation Supervisor: Same as manager, but generally this name applies to managers at the lower, or first line, level of administration.Input of information to a system that transmits messages of the operation of the system to indicate if it operates as planned; information related to any type of planned operation, addressed to the person responsible for its evaluation Supervisor: Same as manager, but generally this name applies to managers at the lower, or first line, level of administration.Input of information to a system that transmits messages of the operation of the system to indicate if it operates as planned; information related to any type of planned operation, addressed to the person responsible for its evaluation Supervisor: Same as manager, but generally this name applies to managers at the lower, or first line, level of administration.

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