One of the most important aspects within the labor sector is decision making. However, we carry out this process frequently, even when we do not notice it. For example, if we are going to buy a certain product and there are two places where it is for sale, we must decide where to buy it or even if it really is convenient for us to do so.
Although the previous example may possibly seem inconsequential, a choice is taking place in it and to be sure that this was the correct one, or at least the most accurate, it is necessary that we know, at least, what the process of making decisions is. decisions, as well as what are the points that must be taken into account before preparing to carry out this or that action.
This issue is essential especially in companies or businesses (whatever their magnitude), because a poorly taken resolution can lead to a bad end. For this reason, the people in charge of decision-making must be trained and fully know all the characteristics and steps of this process.
Another important factor within any type of organization (lucrative or not), is to have good cost control. This is done in an effort to try to obtain quality production or service while spending as little money as possible. This will lead the company to offer its customers reasonable prices and perhaps better than those of the competition.
However, for such a thing to become a reality, it is first necessary to know what costs are, as well as how they are classified. Having this knowledge, it will be much easier for us to perform the tasks described above.
Decision-making process
The decision-making process is the process during 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 begin 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.
What is decision making?
Decision making is a process of defining problems, collecting data, generating alternatives, and selecting a course of action.
Preconditions for decision making
The fundamentals of decision-making come into play every time an organization carries out planning, organizing, directing and controlling activities. However, for a decision-making process to be considered complete, certain preconditions must exist. These preconditions are met when it is possible to answer "yes" to the following four questions:
- Is there a difference between the present situation and the desired goals? Is the decision maker aware of the meaning of the difference? Is the decision maker motivated to act to eliminate the difference? Is the decision maker aware of the difference? Does the decision have the necessary resources (capacity and money, for example) to act in favor of eliminating the difference?
Conditions under which decisions are made
The conditions in which individuals make decisions in an organization are a reflection of the forces of the environment (events and events) that such individuals cannot control, but which can influence the results of their decisions in the future. These forces can range from new technologies or the presence of new competitors in a market to new laws or political unrest. In addition to attempting to identify and measure the magnitude of these forces, managers must estimate their potential impact. For example, in early 1994, the possibility of more than a million people fleeing from Rwanda to Zaire was hardly contemplated, putting enormous pressure on the country's economy and on the resources of international aid agencies.
The impact of events like this will inevitably be felt in the future, sooner or later. Managers and other employees involved in forecasting and planning may feel strongly pressured to identify such events and their impacts, especially when they are not likely to occur until years later. Too often, individuals must base their decisions on the limited information available to them; hence the amount and precision of the information and the level of conceptualization skills of individuals are crucial for making the right decisions.
The conditions under which decisions are made can be broadly classified as certainty, risk and uncertainty. In the following figure, these conditions appear as a continuum.
Certainty.
Certainty is the condition in which individuals are fully informed about a problem, alternative solutions are obvious, and the possible outcomes of each decision are clear. Under certainty, people can at least foresee (if not control) the events and their results. This condition means the due knowledge and clear definition of both the problem and the alternative solutions. Once an individual identifies alternative solutions and their expected results, decision making is relatively easy. The decision maker simply chooses the solution with the best potential outcome. For example, a purchasing agent for a printing company is expected to order standard quality paper from the supplier that offers the lowest price and best service.Of course, the decision-making process is generally not that simple. A problem can have many possible solutions, and calculating the expected results of all of them can be extremely time consuming and expensive.
Decision making under conditions of uncertainty is the exception for most managers and other professionals. Yet front-line managers make decisions on a daily basis with or near certainty. For example, a tight production schedule may force a front-line manager to ask 10 employees to work four hours of overtime. The administrator can determine the cost of overtime with certainty. You can also predict with a high degree of certainty how the number of additional units can be calculated with almost absolute certainty before scheduling overtime.
Risk.
Risk is the condition in which individuals can define a problem, specify the probability of certain events, identify alternative solutions, and state the probability that each solution will give the desired results. Risk usually means that the problem and alternative solutions lie somewhere between the extremes represented by full information and definition and unusual and ambiguous character.
Probability is the percentage of times a specific outcome would occur if an individual made the same decision multiple times. The most common example of probability is the toss of a coin: given a sufficient number of tosses, heads will appear 50 percent of the time and tails will appear 50 percent of the time. Another example is the US federal order that all new automobiles had to be equipped with dual airbags by 1997 to protect the driver and front seat passenger.The U.S. National Highway Traffic Safety Administration concluded that the probability of death in accidents involving seatbelt drivers is reduced by 50 percent in a car equipped with a passenger-side air bag. driver. In contrast, the probability of death in accidents of drivers wearing seat belts without an air bag is reduced by only 45 percent.
The amount and quality of information available to an individual on the relevant decision-making status can vary widely, as can the individual's risk estimates. The type, amount and reliability of the information influence the level of risk and whether the person responsible for making the decision can make use of objective or subjective probability in estimating the result.
Objective probability.
The chance that a specific outcome will occur based on facts and hard numbers is known as objective probability. Sometimes an individual can determine the likely outcome of a decision by examining past records. For example, while life insurance companies cannot determine the year each policyholder will die, they can calculate objective probabilities based on the expectation that death rates prevailing in the past will repeat in the future.
Subjective probability.
An appreciation based on personal judgments and opinions that a specific outcome will occur is known as subjective probability. Such judgments vary from one individual to another, depending on their intuition, previous experience in similar situations, knowledge and personal traits (such as a preference for risk-taking or risk avoidance).
A change in the condition in which decisions are made can alter expectations and practices. Such a change can shift the basis on which to judge the probability of an outcome from objective probability to subjective probability or even uncertainty. Consider changes in the decisions of some motorists as a result of objective and perceived changes in driving conditions on freeways. Sandy Stubbs, Delta's flight attendants, doesn't stop in front of red traffic lights when heading home from the airport late at night. Patti Cantwell, a doctor, did not stop recently one morning when a truck hit her Jeep early in the morning. Both drivers violated the law, in accordance with Florida traffic regulations.But because of the much-talked about tourist killings on the state's highways, some drivers have said they'd rather break the law than put their lives at risk. In this environment of fear, there is a tendency to ignore the traffic rules. Obeying old rules - stopping when the red lights come on, stopping in case of accidents or parking the car and taking a nap if driving at night and drowsy - can now be extremely risky at times, in certain places. The conditions in which drivers make these decisions, especially at night, have changed. "A few years ago we would have been told that if we were tired we should park the car and sleep," Judge Harvey Baxter said. "I would never do something like that again."some drivers have stated that they would rather break the law than put their lives at risk. In this environment of fear, there is a tendency to ignore the traffic rules. Obeying old rules - stopping when the red lights come on, stopping in case of accidents or parking the car and taking a nap if driving at night and drowsy - can now be extremely risky at times, in certain places. The conditions in which drivers make these decisions, especially at night, have changed. "A few years ago we would have been told that if we were tired we should park the car and sleep," Judge Harvey Baxter said. "I would never do something like that again."some drivers have stated that they would rather break the law than put their lives at risk. In this environment of fear, there is a tendency to ignore the traffic rules. Obeying old rules - stopping when the red lights come on, stopping in case of accidents or parking the car and taking a nap if driving at night and drowsy - can now be extremely risky at times, in certain places. The conditions in which drivers make these decisions, especially at night, have changed. "A few years ago we would have been told that if we were tired we should park the car and sleep," Judge Harvey Baxter said. "I would never do something like that again."traffic rules tend to be ignored. Obeying old rules - stopping when the red lights come on, stopping in case of accidents or parking the car and taking a nap if driving at night and drowsy - can now be extremely risky at times, in certain places. The conditions in which drivers make these decisions, especially at night, have changed. "A few years ago we would have been told that if we were tired we should park the car and sleep," Judge Harvey Baxter said. "I would never do something like that again."traffic rules tend to be ignored. Obeying old rules - stopping when the red lights come on, stopping in case of accidents or parking the car and taking a nap if driving at night and drowsy - can now be extremely risky at times, in certain places. The conditions in which drivers make these decisions, especially at night, have changed. "A few years ago we would have been told that if we were tired we should park the car and sleep," Judge Harvey Baxter said. "I would never do something like that again."in certain places. The conditions in which drivers make these decisions, especially at night, have changed. "A few years ago we would have been told that if we were tired we should park the car and sleep," Judge Harvey Baxter said. "I would never do something like that again."in certain places. The conditions in which drivers make these decisions, especially at night, have changed. "A few years ago we would have been told that if we were tired we should park the car and sleep," Judge Harvey Baxter said. "I would never do something like that again."
Uncertainty.
Uncertainty is the condition in which an individual does not have the necessary information to assign probabilities to the results of alternative solutions. In fact, the individual may be unable even to define the problem, much less to identify alternative solutions and possible outcomes. Uncertainty often indicates that the problem and alternative solutions are both ambiguous and extremely unusual.
Dealing with uncertainty is one of the most important facets of the jobs of managers and other professionals, such as research and development engineers, market researchers, and strategic planners. Organizations face uncertainty when entering new markets or launching significantly different products that require the use of novel technologies. The uncertainty is even when organizations undertake a high degree of research and planning before committing resources to certain projects. "The impossibility of a total prediction is clearly illustrated by the principle that if we had tomorrow's newspaper today, a large part of the events reported there would not occur." However,sometimes individuals must make decisions under conditions of uncertainty. They may base these decisions on a combination of research, experience, and thought in the hope that they will lead to the desired results.
The box below from "Globalization in Depth" gives an idea of the uncertainties experienced by Whirlpool's management in the process of deciding to transform into a global company. Whirlpool had until then been a primarily American company. Today it has manufacturing operations in 11 countries and facilities in the United States, Europe and Latin America. It markets its products in more than 120 locations as diverse as Thailand, Hungary and Argentina. This “Globalization in Depth” provides a brief description of the self-diagnosis carried out by Whirlpool's management when confronting the uncertainties that opposed it and from which the final decision to globalize the company's operations was derived.
Framework for decision making
Managers and other employees must make decisions in a wide variety of situations, and no single decision-making method could cover them all on its own. In general, however, the decision maker must begin by precisely defining the problem at hand, then proceed to evaluate alternative solutions, and finally make a decision. The conditions in which decisions are made - certainty, risks and uncertainty - serve as the basis for a very complete framework for decision making. Decisions can be classified as routine, adaptive, or innovative. These categories reflect the type of problem faced and the type of solutions considered.The following figure illustrates the different combinations of problem types (vertical axis) and solution types (horizontal axis) that result in the three categories of decision making.
Types of problems.
The types of problems faced by managers and other employees range from the well-known and clearly defined to the unusual and ambiguous. The bank teller with an unbalanced account at the end of the day faces a known and clearly defined problem. In contrast, the problem of women and minority members not quickly rising to administrative positions is ambiguous. Some people argue that the cause of them are both explicit and hidden forms of discrimination, while others consider that, administrative conduits and that gender and racial discrimination no longer has anything to do with the problem.
Types of decisions.
The alternative solutions available also range from the well-known and clearly defined to the experimental and ambiguous. The bank teller with an unbalanced account follows a specific and clearly defined procedure: the review of all withdrawals against all deposits and receipts of cash operations and the new counting of all cash.
On the contrary, a few years ago the Boeing Company faced the daunting task of finding a permanent solution to the serious problem of engine failure in its 747 aircraft. It was finally able to announce that extensive engineering work and billions of calculations on supercomputers had produced a reply. Evidence indicated that the fault lay in a hollowed out steel “cast peg”, slightly smaller than a soda can, with which the engines are attached to the wings. Supposedly, this piece should only come off in a crash (to reduce the risk to passengers), but the truth was that it broke while the planes were in mid-flight. The company tried to solve the problem by introducing a new generation of cast pegs in 1980. However,these also proved to be susceptible to failure. The company then proceeded to produce a third generation of dowels - supplemented with an additional steel clamp to deal with failures - in full expectation of their proper function. According to the original design, even a sudden pin fracture would not have to cause a 747 to fall. The company had anticipated that if a pin were dislodged mid-flight, the affected engine would simply fall and the plane would continue its flight with the other three. However, he discovered that if one of the internal motors detaches, it can impact against the external motor of the same wing and therefore also detach it, as happened in the air accidents in both Taiwan and the Netherlands.The company then proceeded to produce a third generation of dowels - supplemented with an additional steel clamp to deal with failures - in full expectation of their proper function. According to the original design, even a sudden pin fracture would not have to cause a 747 to fall. The company had anticipated that if a pin were dislodged mid-flight, the affected engine would simply fall and the plane would continue its flight with the other three. However, he discovered that if one of the internal motors detaches, it can impact against the external motor of the same wing and therefore also detach it, as happened in the air accidents in both Taiwan and the Netherlands.The company then proceeded to produce a third generation of dowels - supplemented with an additional steel clamp to deal with failures - in full expectation of their proper function. According to the original design, even a sudden pin fracture would not have to cause a 747 to fall. The company had anticipated that if a pin were dislodged mid-flight, the affected engine would simply fall and the plane would continue its flight with the other three. However, he discovered that if one of the internal motors detaches, it can impact against the external motor of the same wing and therefore also detach it, as happened in the air accidents in both Taiwan and the Netherlands.
Routine decisions.
Routine decisions are standardized choices in response to relatively defined and known problems and workarounds. Employees often find a solution in established rules or standard operating procedures or, increasingly, in computer software such as computerized airline reservation systems. Cleaning buildings, processing payroll vouchers, packing and shipping customer orders, and completing travel arrangements are just a few of the tasks that require routine decisions.
Employees should avoid the tendency to make routine decisions when what a problem really demands is an adaptive or innovative decision. An administrator says in a meeting: “Let's invest more in television advertising. When we did this in 1994, our sales increased enormously. " However, this kind of routine reflection can be based on wrong logic. The implication is that since sales increased as a result of an increase in advertising expenditures, the cause of the increased sales was the increase in the advertising budget. However, perhaps the truth is that sales have increased for many other reasons, including good luck. The proposal to intensify publicity requires stronger evidence,while the causes of lags in sales require a deeper analysis. In this case, at least the need to make an adaptive decision is imposed.
Adaptive decisions.
Adaptive decisions are dispositions made in response to a combination of moderately unusual and only partially known problems and their alternative solutions. Adaptive decisions generally involve modifying and refining previous decisions and routine practices. In fact, the concept of continuous improvement is one of the keys to total quality management.
Continuous improvement involves a succession of adaptive decisions made within an organization, which result year after year in a large number of small improvements. Continuous improvement demands a commitment to the constant diagnosis of technical, organizational and administrative processes in search of improvements. This process could be compared to the wheel that is usually placed inside hamster cages: a ladder inserted into a cylinder, without beginning or end. At every turn of the wheel, you improve an existing product and its production methods. Year after year the organization's products improve, become more reliable and less expensive. John P. McTague, vice president of research for the Ford Motor Company, says:"The accumulation of large amounts of small improvements is in most industries the surest means to strengthen the competitive advantage of an organization."
Continuous improvement is governed by the goals of providing higher quality, increasing efficiency, and responding to customer needs. Correspondingly, the improvements generally serve to:
- Increase customer value through new and improved products and services Reduce errors, defects and waste Increase sensitivity to changes and customer experiences Increase productivity and efficiency in the use of all resources
Continual improvement is one of the cornerstones of Rubbermaid's value system and strategy. This company is consistently ranked as one of America's Most Admirable, Adaptive, and Innovative Companies in Fortune magazine's annual corporate reputation survey. Some examples of Rubbermaid's adaptive process and decisions are given in the box below “Quality Throughout”.
Innovative decisions.
Innovative decisions are choices based on the discovery, identification and diagnosis of unusual and ambiguous problems and the development of exceptional or creative alternative solutions. These solutions often involve a series of small, interrelated decisions, made over the course of several months, or even years. In particular, the most cutting-edge innovations can involve several development and involve numerous specialists and teams. Since innovative decisions usually represent a sharp break with the past, they generally do not follow a logical and orderly sequence. In fact, they are sometimes taken before a problem is even fully understood. To be effective, decision-makers must take special care, therefore,in defining the indicated problem; They must also recognize that past actions can significantly influence decisions made at any given time.
In the last 20 years, Hannover Insurance went from the bottom of the property and liability insurance industry to 25 percent of the best companies in the industry in the United States; it is considered an important innovator in this sector of the insurance industry. William O'Brien, CEO of Hannover, expressed in this way - and not exactly in a logical and orderly sequence - some of his ideas about innovation:
We have to transcend mechanical and linear reflection. The essence of our job as administrators is to deal with "divergent" problems, problems with no easy solution. "Convergent" problems, those for which "correct" solutions are available, must be solved linearly. But we are extremely conditioned to view the world in terms of converging problems. Most administrators apply simplistic and forced solutions and nullify any possibility of learning when faced with divergent problems. Everyone is an expert in linear issues, so companies that learn to handle divergent issues will thus gain a great advantage.
The next basic stage in our progression was understanding the analysis. We learned that true openness is rooted in people's ability to constantly analyze their ideas. This means exposing yourself to mistakes, which often don't pay off most employees. But those who do not look for errors and imperfections in their ideas do not learn.
The definition of unusual and ambiguous problems in an organization will continue to be an evolutionary process, subject to many points of view, vested interests, and pieces of information that are available at different times. Stakeholders will make their pressures felt in ebbs and flows, which requires moving from one unusual and ambiguous problem to another, and making adjustments to the definitions to include or exclude various individuals. Sometimes the real problem doesn't materialize until well into the decision-making process, perhaps even after some action is taken.
Whirlpool's decision to become a global company represented a major breakthrough decision that involved the need for many other breakthrough decisions and behaviors. One of the innovations involved finding ways to get employees at all levels to embrace Whirlpool's vision as a global company. David Whitwam, CEO of Whirlpool, then commented:
An organization must be created whose staff are willing to exchange ideas, processes and systems across borders; be absolutely free of the "that wasn't invented here" syndrome; work permanently together to identify the best global opportunities and the biggest global problems facing the organization.
Innovative decisions are often made based on information that is incomplete or that may change from one moment to the next. Hence, conditions in the Whirlpool task environment remain uncertain, unstable and ambiguous.
Decision-making model
Our explanations of the preconditions and circumstances of decision-making provide a basis on which to examine three models of decision-making: the rational, the bounded rationality, and the political. These models were created by management theorists to describe various decision-making processes. Goals are important in all three.
Rational model.
The rational model prescribes a series of steps that individuals or teams must take to increase the probability that their decisions are logical and well-founded. A rational decision allows the maximum achievement of goals within the limitations of the situation. This definition refers to the rationality of the means (how best to achieve a goal), not of the ends (that is, the goals). For example, the goal of many utility companies is to generate electricity at the lowest possible cost. One of the means to achieve this goal is to minimize the cost of fuel used to power generators. Thus, some power plants have been designed to allow easy switching from one type of fuel to another. The manager of a plant of this type can choose between natural gas,oil or coal, depending on their relative costs at any particular time. If the cost of natural gas soars relative to that of oil and coal, the rational decision would be to go for oil or coal. Continuing to use natural gas in those circumstances would be an irrational decision.
The following figure shows the rational decision-making model, which consists of a seven-step process. This process begins with the definition and diagnosis of the problem and goes through the successive steps to follow-up and control. When making routine decisions, individuals can easily follow these steps. Additionally, this process is more likely to be used in situations involving near-certainty or low-risk conditions, where objective probabilities can be assigned to the results. Routine decisions in conditions close to certainty do not obviously require the follow-up of all the steps of this model. For example, if a particular problem tends to recur,decisions (solutions) may need to be put in writing as standard operating rules or procedures. Additionally, individuals or teams rarely follow these seven steps sequentially when making adaptive or innovative decisions.
Step 1: Definition and diagnosis of the problem. If individual managers, teams, or employees are unaware of the real problems and their possible causes, effective decision-making is impossible. The definition and diagnosis of problems involves three conceptualization skills: perception, interpretation and incorporation. Perception involves the identification and monitoring of numerous external and internal environmental forces and the conclusion about which of them contribute to the problem or problems. Interpretation involves evaluating the perceived forces and determining the causes, not just the symptoms, of the real problem. Finally, incorporation implies linking those interpretations with the current or desirable goals (step 2) of the department or organization. If perception,interpretation and incorporation are done incorrectly, it is likely that ultimately the individual or team will choose a poor solution.
Let us consider two examples of the need for an accurate definition and diagnosis of problems. Taking an aspirin to control a headache can be helpful in the short term, but headaches are usually a symptom, not the problem. The problem behind the symptom could be physiological (visual fatigue, for example) or psychological (tension, for example). Also, problems are sometimes incorrectly defined in terms of proposed solutions. For example, members of a marketing department can claim that "the problem is that our department is understaffed." If proceeded on the basis of this definition of the problem, the department members would focus on the obvious goal of obtaining funds for the opening of new positions. However,It may well be that the basic problem is that the company's sales strategies have become ineffective as a result of the actions of competitors.
In defining and diagnosing problems, it is essential to ask numerous probing questions. But how should "question" be defined? The following multiple meanings expressed by two creativity experts can be used:
- A question is an invitation to creativity. It is a disturbing matter. It is the beginning of an adventure. It is an answer in disguise. A question raises and reveals what until then has not been posed or revealed. It is a starting point. It does not have beginning nor end.
By asking a wide variety of questions about who, when, where, how and why, individuals and teams will increase the chances of effective problem definition and diagnosis.
Step 2: Goal setting. Once individuals or teams have defined a problem, they can set specific goals for its elimination. For example, suppose the top management of a company has defined excessive manufacturing costs as a problem, which is really just a symptom of the real problem. The real problem could be that faulty materials (inputs) are used in the production process, that the quality control (inspection) skills of the production workers are inadequate, or many other possibilities. However, management could turn the apparent problem into a hierarchy of goals for the various levels of the organization, from the divisional to that of the lathe operators. In these goals the desired results would be formulated:what to achieve and by what date.
In conditions of uncertainty, setting precise goals can be extremely difficult. Individuals or teams may need to identify alternative goals, compare and evaluate them, and then make a selection among them. For example, you might set a general goal to develop professionally in the field of management, and still be unsure about which specific path to take. Do you want to be an accountant, a sales representative, or choose one of the many other occupations that can offer a successful track record in management? To determine an answer, you will need to consider alternative routes to meeting your overall goal.
Step 3: Search for alternative solutions. Individuals or teams must seek alternative means of achieving a goal. This step could involve seeking additional information, creative reflection, consulting experts, conducting research, or similar actions. However, when there appears to be no feasible solution to meeting a goal, it may be necessary to modify it. For example, some people set impossible goals and then strive to achieve them, often without success. The chosen solution could be to work longer, literally seven days a week. The result could ultimately be high levels of tension and dissatisfaction, ultimately forcing these individuals to re-examine their goals and decide which ones are really important.
Step 4: Comparison and evaluation of alternative solutions. After individuals or teams have identified alternative solutions, they must compare and evaluate them. In this step, the expected results and the determination of the relative cost of each alternative are highlighted.
Step 5: Selection between alternative solutions. Decision making is often associated with making a final choice. The selection of a solution, however, is just one more step in the rational decision-making process. Many administrators complain that when recent college graduates are assigned a project, they tend to present and expose only one solution. Under these conditions, instead of being able to compare and evaluate several alternatives, an administrator can only accept or reject the option that is proposed to her. Although the selection between alternative solutions may seem straightforward, it can actually be extremely difficult when the problem is complex and ambiguous and involves high degrees of risk or uncertainty.
Step 6: Implementation of the selected solution. The fact that the selection of a solution has been made correctly does not necessarily mean that its execution will be successful. A technically correct decision has to be accepted and supported by those who will be responsible for putting it into practice if the decision is to be effective. If the selected solution cannot be implemented for some reason, another should be considered.
Paso 7: Seguimiento y control. La sola implementación de la solución preferida no garantiza automáticamente el cumplimiento de la meta deseada. Los individuos o equipos deben controlar las actividades de implementación y mantener su seguimiento mediante la evaluación de los resultados. Si la implementación no produce resultados satisfactorios, será necesario emprender acciones correctivas. Dado que las fuerzas del entorno que influyen en las decisiones cambian constantemente, el seguimiento y control puede indicar la necesidad de redefinir el problema o de revisar la meta original. La retroalimentación derivada de este paso podría apuntar incluso a la necesidad de comenzar de nuevo y repetir en su totalidad el proceso de toma de decisiones. Esto fue lo que hizo Boeing en respuesta al problema de la caída de motores de algunos de sus modelos 747. Finalmente, Boeing rediseñó y reemplazó totalmente las monturas de los motores de sus modelos 747 y emitió nuevos procedimientos de mantenimiento para las aerolíneas.
The rational model could be conceived as an ideal, as the means by which individuals or teams approach rationality in decision-making. At best, however, human decision-making hardly comes close to this ideal. When faced with certain types of problems, people don't even bother to follow the seven steps of the rational model. Instead, he may apply the limited or political rationality models, which are based on observations of the real decision-making processes of organizations. Such observations indicate that individuals modify or even ignore the rational model, especially in the face of certain types of adaptive and innovative decisions.
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 prejudices.
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.
- The costs
As we already know, cost control is of vital importance for any company that is dedicated to the manufacture of any type of product or the provision of a service, since this serves to determine both the sale price and the profit that we wish to obtain..
It should be noted that keeping cost control under perfectly identified principles is not exclusive to large companies, it is also applicable to small or medium-sized businesses, both public and private, profitable or non-profit, as these principles can be adapted to the specific needs of each type of organization.
The main purpose of a cost control is to obtain a quality production with the minimum possible expenses, in order to offer the public the lowest price and thus be able to compete in the market and try to obtain a balance between supply and demand for our products.
Cost accounting is also a tool that makes it easier for management to carry out its basic activities such as planning, organization, direction and control to achieve better decision-making, as well as an effective organization of the work team.
The degree of participation of cost accounting in the company depends on it, in some cases the cost department is dedicated only to the compilation of product costs; On the other hand, in others, a team of specialized accountants is established to provide all kinds of information related to the disbursements that are necessary for the manufacture of the product and the purpose or object they have for it.
General concept of costs
Cost is a resource that is sacrificed or given up to achieve a specific goal.
The production cost is the value of the set of goods and efforts that have been incurred or will be incurred, which must be consumed by the manufacturing centers to obtain a finished product, in a condition to be delivered to the commercial sector.
Among the objectives and functions of cost determination, we find the following:
- Serve as a basis for setting sales prices and establishing marketing policies Facilitate decision-making Allow inventory valuation Control the efficiency of operations Contribute to the planning, control and management of the company.
Classification of costs
Costs can be classified in various ways:
- According to the accounting periods:
- Current costs: those incurred during the production cycle to which they are assigned (example: motive force, wages). Expected costs: they incorporate charges into costs in advance of the time when payment is actually made (example: charges deferred costs: expenditures that are made on a deferred basis (example: insurance, rents, depreciation, etc.).
Industrial costs
- Commercial costs Financial costs
- According to the form of allocation to the product units:
- Direct costs: those whose monetary impact on a product or a work order can be established with precision (raw materials, wages, etc.) Indirect costs: those that cannot be assigned with precision; therefore a proration basis (insurance, lubricants) is needed.
- Variable costs: the total change in relation to changes in a cost factor Fixed costs: They do not change despite changes in a cost factor Semi-fixed costs.
- conclusion
Having completed this work on the decision-making process and costs, it is possible for me to conclude that in order to undertake any type of business, it is vitally important that I first get involved with issues like these, otherwise, I can never really understand if it is working well or not.
Thanks to the graphic presentation that is carried out on the rational decision-making model, I managed to understand in more detail how a choice should really be made, knowing first what is the problem that I must solve through it and then thoroughly analyze the possible paths I can follow to reach my goal.
Likewise, it seemed important to me to realize that making a decision does not only mean choosing a certain project and letting it walk alone, but that it should always be monitored, as well as frequently evaluated to know if it has been the answer to our problems or not. In this way, I will be able to gain experience and it will be easier for me to carry out a determination in the future.
In reference to costs, I did not believe that there could be so many classifications of these. I was pleased to know and understand each one of them, in such a way that it will be easier for me to evaluate the prices of my products and the expenses that I may have, if, as I said before, I get to venture into the business world.
- Bibliography
Name of the book: "Administration".
Author: Don Hellriegel / Jonh W. Slocum.
Publisher: Internacional Thomson Editores.
Edition: 7th edition.
Address of the page: www.monografias.com/trabajos4/costos/costos.shtml
Title: "Decision making".
Author: Mary Emily B.
Page address: www.monografias.com/trabajos13/ltomadec/ltomadec.shtml
Title: "Decision making".
Author: Josi Miguel Mindez Blanco.
Address of the page: www.monografias.com/trabajos4/costos/costos.shtml
Title: "Introduction to the Theory of Costs".
Author: Marina Ivnisky
Page address: www.monografias.com/trabajos13/costestan/costestan.shtml
Title: "Standard costs".
Author: Beatriz Zamarrón.
Summary:
The following work presents the decision-making process, touching on topics such as what is decision-making ?, preconditions for decision-making, conditions in which decisions are made, frame of reference for decision-making, decision-making model, barriers to effective decision-making. Likewise, reference is made to the topic of costs, including the general concept of costs and the classification of costs.
Work submitted by:
Rosa Martha Núñez Arroyo.
Date of completion: September 20, 2003.
Age: 21 years.
Studies: Computer and Systems Engineering.
DECISION MAKING AND COSTS
Contributed by: Rosa Martha Núñez Arroyo. - [email protected]
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