Introduction
Making decisions is not something unknown to us: we do it every day, it is likely that by making so many, some seem automatic, so we must be especially careful with them. Good decisions do not come easily, they are the result of an arduous orderly mental process. Conditions change, so we cannot expose ourselves to the risks of a mechanical response or an intuitive approach. In fact, the experiences for quick decisions can be so great that they can lead us; without realizing it, into a trap.
Decision analysis underpins all managerial functions. Nothing a manager does is more important than using the best information available to make good decisions. The damage caused to an organization by a basically wrong decision cannot be avoided by the most careful planning or basic implementation.
Decision making, definitions by some authors
Freemont E. Kast: Decision-making is fundamental to the organism the conduct of the organization. Decision making provides the means for control and enables consistency in systems. (KAST, 1979).
Moody is an action that must be taken when there is no more time to collect information.
Leon Blan Buris defines that a decision is a choice that is made between several alternatives.
Le Moigne defines the term to decide how to identify and solve the problems that are presented to every organization. Therefore, the trigger for the decision-making process is the existence of a problem, but when does a problem exist? For Huber there will be a problem when there is a difference between the real situation and the desired situation. The solution to the problem may consist of modifying one or the other situation, therefore it can be defined as the conscious process of reducing the difference between the two situations.
Greenwood says that decision-making for management essentially amounts to solving business problems. The diagnoses of problems, the searches and evaluations of alternatives and the final choice of a decision, constitute the basic stages in the process of decision making and problem solving.
Techniques and Tools
We are going to propose a division between the techniques that allow us to model the process and the tools that are included within it.
Regarding the techniques, we will take into account the model developed by Simón for the description of the decision-making process, and which is the basis of all the models made in this regard. It consists of three main phases:
- Investigation (intelligence) exploration of the environment on the conditions that require decisions. Input data is collected, processed, and examined for clues that may identify problems or opportunities. Design. Invention, development and analysis of possible courses of action. This involves the processes to understand the problem, to generate the solutions and to test the solutions according to their feasibility. Choice. Selection of an alternative or course of action among those that are available. A selection is made and implemented.
In reference to the tools we are going to conceptualize, in the first instance, some of the most important theories that have direct influence in decision-making, we refer to: game theory, cardinal utility theory and theory of restrictions.
In the last twenty years, game theory (or interactive decision theory) has become the dominant model in economic theory and has contributed significantly to political science, biology, and national security studies. The central role of game theory in economic theory was recognized with the Nobel Prize in economics awarded to John C. Harsanyl, John Nash and Reinhard Selten in 1994, this theory analyzes strategic behavior when two or more individuals interact and each individual decision it results from what he (or she) expects others to do. In other words, we must expect it to happen from the interactions between individuals.
In the 1940s, Von Newmann and Morgenstem argued that people do not always make decisions seeking to maximize the expected monetary value but rather seek to maximize the expected utility, thus the theory of cardinal utility or utility at risk was born. Based on logical assumptions about the way people choose between options, both authors developed a procedure to quantify or measure the usefulness that goods or money have for a person.
In the 1970s, Eliyahu Goldratt, Ph.D. in Physics developed what has become known as the theory of constraints (thoery of constraints or simply TOC), which is based on the idea that the objective (or goal) of Every company (or system) is making money in a sustained way, increasing throughput (income through sales) at the same time that inventories and operating expenses are reduced.
The key to this philosophy is to show that every company is a large chain of interdependent resources (machinery, personnel, facilities and others), but that only a few of those resources, called "bottlenecks" or "restrictions", are the that condition the output of all production. The restrictions, then, do not refer to scarce resources, but to erroneous criteria and decisions that prevent the firm from achieving its objective.
Stages of decision making
This process can be applied both to your personal decisions and to a company action, in turn it can also be applied to both individual and group decisions.
Stage 1. Identifying a problem
The decision-making process begins with a problem, that is, the discrepancy between a current state of affairs and a desired state. Now, before anything can be characterized as a problem, managers need to be aware of discrepancies, be under pressure for action, and have the necessary resources. Managers may perceive that they have a discrepancy by comparison between the current state of affairs and some norm, which may be past performance, previously set goals, or the performance of some other unit within the organization or in other organizations. In addition, there must be some kind of pressure on this discrepancy, otherwise the problem can be postponed until some time in the future. Thus, for the decision process,the problem must put some kind of pressure on the manager to act. This pressure can include organizational policies, deadlines, financial crises, an upcoming performance review, etc.
Stage 2. Identification of the criteria for decision making.
Once the existence of the problem is known, the decision criteria that will be relevant for solving the problem must be identified. Each person who makes decisions usually has criteria that guide them in their decision. This step tells us that the criteria that are identified are as important as those that are not; since a criterion that is not identified will be considered irrelevant by the decision maker.
Stage 3. Assigning weights to the criteria.
The criteria selected in the previous phase do not all have the same importance, therefore, it is necessary to weight the variables that are included in the list in the previous step, in order to give them the correct priority in the decision. This step can be carried out by giving the highest value to the preferred criterion and then comparing the others to value them in relation to the preferred one.
Stage 4. The development of alternatives.
This step consists of obtaining all the viable alternatives that may be successful in solving the problem.
Stage 5. Analysis of the alternatives.
Once the alternatives have been developed the decision maker must carefully analyze them. Strengths and weaknesses become evidence.
As they are compared with the criteria established in stage 2 and 3. Each alternative is evaluated comparing it with the criteria. Some assessments can be achieved in a relatively objective way, but nevertheless, there is usually some subjectivity, so most decisions usually contain judgments.
Stage 6. Selection of an alternative.
It consists of selecting the best alternative of all those valued.
Stage 7. The implementation of the alternative.
While the selection process is completed with the previous step, however, the decision may fail if it is not carried out correctly. This step attempts to carry out the decision, and includes making the decision known to affected people and getting them to commit to it. If the people who have to execute a decision participate in the process, it is easier for them to enthusiastically support the decision. These decisions are made through effective planning, organization and direction.
Stage 8. The evaluation of the effectiveness of the decision.
This step judges the decision-making outcome process to see that the problem has been corrected. If, as a result of this evaluation, it is found that the problem still exists, you will have to study what was done wrong. The answers to these questions can take us back to one of the first steps and even to the first step.
Types of Decisions
All decisions are not the same, nor do they produce the same consequences, nor is their adoption of the same relevance, therefore there are different types of decisions, for their classification we will highlight the most representative ones. (Claver, 2000).
1. Typology by levels
It is connected with the concept of organizational structure and the idea of hierarchy that derives from it, decisions are classified according to the hierarchical position or administrative level occupied by the decision maker. From this approach we will distinguish.
- Strategic (or planning) decisions are decisions made by decision-makers located at the apex of the hierarchical pyramid or senior managers. These refer to the relationships between the organization or company and its environment. They are decisions of great importance since they define the general aims and objectives that affect the entire organization; They are singular long-term and non-repetitive decisions, so the information is scarce and their effects are hardly reversible; Errors can compromise the development of the company and in certain cases its survival, thus requiring a high degree of reflection and judgment. Tactical or piloting decisions; they are decisions made by middle managers. These decisions can be repetitive and the degree of repetition is sufficient to rely on precedents. Errors do not imply very heavy penalties unless they accumulate. Operational decisions, made by executives who are at the lowest level. They are those related to the current activities of the company. The degree of repeatability is high: they are often translated into automatic routines and procedures, so the information is available. Errors can be corrected quickly since the term it affects is short and the penalties are minimal.
2. Typology by methods
This classification is due to Simón (1977) who makes a classification based on the similarity of the methods used for decision-making, regardless of the decision levels. Thus he distinguishes a continuous series of decisions, at the ends of which are programmed and unscheduled decisions.
- Programmed decisions are understood to be those that are repetitive and routine, when a procedure has been defined or a criterion (or decision rule) has been established that facilitates dealing with them, allowing them not to be treated again each time a decision must be made.. In this type of decision, it is not the greater or lesser difficulty in deciding, but rather it lies in the repetitiveness and the possibility of predicting and analyzing its component elements, no matter how complex they may be. Non-programmed decisions are those that are new for the company unstructured and important in themselves. There is no established method of handling the problem because it has not arisen before or because its nature or structure is complex, or because it is so important that it deserves a tailored treatment.It is also used for problems that may occur periodically but may require modified approaches due to changes in internal or external conditions. Koontz and Weihrich show the relationship between the administrative level where decisions are made, the kind of problem they face and the kind of decision that needs to be taken to deal with it. High-level managers face unscheduled decisions, since they are unstructured problems and as one descends the organizational hierarchy, the more structured or understandable the problems are and therefore, the more programmed the decisions will be. (Koontz)they highlight the relationship between the administrative level where decisions are made, the kind of problem they face and the type of decision that needs to be taken to deal with it. High-level managers face unscheduled decisions, since they are unstructured problems and as one descends the organizational hierarchy, the more structured or understandable the problems are and therefore, the more programmed the decisions will be. (Koontz)they highlight the relationship between the administrative level where decisions are made, the kind of problem they face and the type of decision that needs to be taken to deal with it. High-level managers face unscheduled decisions, since they are unstructured problems and as one descends the organizational hierarchy, the more structured or understandable the problems are and therefore, the more programmed the decisions will be. (Koontz)since they are unstructured problems and as one descends in the organizational hierarchy, the more structured or understandable the problems are and therefore, the more programmed the decisions will be. (Koontz)since they are unstructured problems and as one descends in the organizational hierarchy, the more structured or understandable the problems are and therefore, the more programmed the decisions will be. (Koontz)
conclusion
The decision-making process is undoubtedly one of the greatest responsibilities, however decisions mark the success or failure of any organization, they are like the engine of business.
When making a decision, it is important that the problem or situation be studied and deeply considered in order 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.
Also making a decision consists of resilience because we must never give up in the face of the obstacles that are put in front of us.
After making a decision there is no going back and you will have to face the consequences, so take some time to analyze what you are going to do.
Bibliography
- (sf). Retrieved on February 20, 2014, from http://www4.ujaen.es/~cruiz/diplot-5.pdfClaver, EL (2000). Business Administration Manual (4th ed.). Madrid, KAST, FE (1979). Organization Administration. Editorial Mc GranW-Hill. Koontz, H. y. Administration. A Global perspective. Mexico: Mc. Graw Hill.
