This alludes to the famous play “Hamlet” by Shakespeare. Hamlet was a character who was highly indecisive about what he wanted to do and always mulled over things while taking a decision and many a times avoided or delayed taking decisions. This could mean disaster if applied in case of a working manager as he has to be on his toes and take fast decisions. This is more relevant today when the whole world is a market and even a momentary indecisiveness could result in millions being lost in the trade.
We all make decisions of varying importance every day, so the idea that decision making can be a rather sophisticated art may at first seem strange. However, studies have shown that most people are much poorer at decision making than they think. An understanding of what decision making involves, together with a few effective techniques, will help produce better decisions.
What is Decision Making?
1. Making a decision implies that there are alternative choices to be considered, and in such a case we want, not only to identify as many of these alternatives as possible but to choose the one that best fits with our goals, desires, lifestyle, values, and so on.
2. It should be noted here that uncertainty is reduced rather than eliminated. Very few decisions are made with absolute certainty because complete knowledge about all the alternatives is seldom possible. Thus, every decision involves a certain amount of risk.
Kinds of Decisions
There are several basic kinds of decisions.
1. Decisions whether. This is the yes/no, either/or decision that must be made before we proceed with the selection of an alternative. Should I buy a new TV? Should I travel this summer? Decisions whether are made by weighing reasons pro and con. It is important to be aware of having made a decision whether, since too often we assume that decision making begins with the identification of alternatives, assuming that the decision to choose one has already been made.
2. Decisions which. These decisions involve a choice of one or more alternatives from among a set of possibilities, the choice being based on how well each alternative measures up to a set of predefined criteria.
3. Contingent decisions.
Most people carry around a set of already made, contingent decisions, just waiting for the right conditions or opportunity to arise. Time, energy, price, availability, opportunity, encouragement–all these factors can figure into the necessary conditions that need to be met before we can act on our decision.
Decision whether … select criteria … identify alternatives … make choice
The Components of Decision Making
The Decision Environment
Every decision is made within a decision environment, which is defined as the collection of information, alternatives, values, and preferences available at the time of the decision. An ideal decision environment would include all possible information, all of it accurate, and every possible alternative. However, both information and alternatives are constrained because time and effort to gain information or identify alternatives are limited. The major challenge of decision making is uncertainty, and a major goal of decision analysis is to reduce uncertainty. We can almost never have all information needed to make a decision with certainty, so most decisions involve an undeniable amount of risk.
Delaying a decision as long as reasonably possible, then, provides three benefits:
1. The decision environment will be larger, providing more information. There is also time for more thoughtful and extended analysis.
2. New alternatives might be recognized or created.
3. The decision maker’s preferences might change. With further thought, wisdom, maturity.
The Effects of Quantity on Decision Making
Many decision makers have a tendency to seek more information than required to make a good decision. When too much information is sought and obtained, one or more of several problems can arise. (1) A delay in the decision occurs because of the time required to obtain and process the extra information. This delay could impair the effectiveness of the decision or solution. (2) Information overload will occur. In this state, so much information is available that decision-making ability actually declines because the information in its entirety can no longer be managed or assessed appropriately. A major problem caused by information overload is forgetfulness. When too much information is taken into memory, especially in a short period of time, some of the information (often that received early on) will be pushed out.
The example is sometimes given of the man who spent the day at an information-heavy seminar. At the end of the day, he was not only unable to remember the first half of the seminar but he had also forgotten where he parked his car that morning.
(3) Selective use of the information will occur. That is, the decision maker will choose from among all the information available only those facts which support a preconceived solution or position. (4) Mental fatigue occurs, which results in slower work or poor quality work.
The quantity of information that can be processed by the human mind is limited. Unless information is consciously selected, processing will be biased toward the first part of the information received. After that, the mind tires and begins to ignore subsequent information or forget earlier information.
A common misconception about decision making is that decisions are made in isolation from each other: you gather information, explore alternatives, and make a choice, without regard to anything that has gone before. The fact is, decisions are made in a context of other decisions. The typical metaphor used to explain this is that of a stream. There is a stream of decisions surrounding a given decision, many decisions made earlier have led up to this decision and made it both possible and limited. Many other decisions will follow from it.
As example, when you enter a store to buy a VCD or TV, you are faced with the preselected alternatives stocked by the store. There may be 200 models available in the universe of models, but you will be choosing from, say, only a dozen. In this case, your decision has been constrained by the decisions made by others about which models to carry.
It is important to realize that every decision you make affects the decision stream and the collections of alternatives available to you both immediately and in the future. In other words, decisions have far reaching consequences.
Acceptance. Those who must implement the decision or who will be affected by it must accept it both intellectually and emotionally.
Acceptance is a critical factor because it occasionally conflicts with one of the quality criteria. In such cases, the best thing to do may be to choose a lesser quality solution that has greater acceptance.
For example, when cake mixes first were put on the market, manufacturers put everything into the mix–the highest quality and most efficient solution. Only water had to be added. However, the mixes didn’t sell well–they weren’t accepted. After investigation, the makers discovered that women didn’t like the mixes because using the mixes made them feel guilty: they weren’t good wives because they were taking a shortcut to making a cake. The solution was to take the egg and sometimes the milk out of the mix so that the women would have something to do to “make” the cake other than just adding water. Now they had to add egg and perhaps milk, making them feel more useful. The need to feel useful and a contributor is one of the most basic of human needs. Thus, while the new solution was less efficient in theoretical terms, it was much more acceptable. Cake mixes with the new formula became quite popular.
Thus, the inferior method may produce greater results if the inferior one has greater support. One of the most important considerations in decision making, then, is the people factor. Always consider a decision in light of the people implementation.
A decision that may be technologically brilliant but that is sociologically stupid will not work. Only decisions that are implemented, and implemented with thoroughness (and preferably enthusiasm) will work the way they are intended to.
Approaches to Decision Making
1. Authoritarian. The manager makes the decision based on the knowledge he can gather. He then must explain the decision to the group and gain their acceptance of it.
2. Group. The group shares ideas and analyses, and agrees upon a decision to implement. Studies show that the group often has values, feelings, and reactions quite different from those the manager supposes they have. No one knows the group and its tastes and preferences as well as the group itself.
There are two types of group decision making sessions. First is free discussion in which the problem is simply put on the table for the group to talk about.
The other kind of group decision making is developmental discussion or structured discussion. Here the problem is broken down into steps, smaller parts with specific goals. Developmental discussion (1) insures systematic coverage of a topic and (2) insures that all members of the group are talking about the same aspect of the problem at the same time.
Some Decision Making Strategies
1. Optimizing. This is the strategy of choosing the best possible solution to the problem, discovering as many alternatives as possible and choosing the very best. How thoroughly optimizing can be done is dependent on
1. Importance of the problem
2. Time available for solving it
3. Cost involved with alternative solutions
4. Availability of resources, knowledge
5. Personal psychology & values
Note that the collection of complete information and the consideration of all alternatives is seldom possible for most major decisions, so that limitations must be placed on alternatives.
2. Satisficing. In this strategy, the first satisfactory alternative is chosen rather than the best alternative. If you are very hungry, you might choose to stop at the first decent looking restaurant in the next town rather than attempting to choose the best restaurant from among all (the optimizing strategy). The word satisficing was coined by combining satisfactory and sufficient. For many small decisions, such as where to park, what to drink, which pen to use, which tie to wear, and so on, the satisficing strategy is perfect.
3. Maximax. This stands for “maximize the maximums.” This strategy focuses on evaluating and then choosing the alternatives based on their maximum possible payoff. This is sometimes described as the strategy of the optimist, because favorable outcomes and high potentials are the areas of concern. It is a good strategy for use when risk taking is most acceptable, when the go-for-broke philosophy is reigning freely.
4. Maximin. This stands for “maximize the minimums.” In this strategy, that of the pessimist, the worst possible outcome of each decision is considered and the decision with the highest minimum is chosen. The Maximin orientation is good when the consequences of a failed decision are particularly harmful or undesirable. Maximin concentrates on the salvage value of a decision, or of the guaranteed return of the decision. It’s the philosophy behind the saying, “A bird in the hand is worth two in the bush.”
Decision Making Procedure:
1.Identify the decision to be made together with the goals it should achieve.
2.Get the facts.
4.Rate each alternative.
5.Rate the risk of each alternative.
6.Make the decision.
Risk Taking Metrics:
1. Only the risk takers are truly free. All decisions of consequence involve risk. Without taking risks, you cannot grow or improve or even live.
2.There is really no such thing as permanent security in anything on earth. Not taking risks is really not more secure than taking them, for your present state can always be changed without action on your part.
3.You are supposed to be afraid when you risk. Admit your fears–of loss, of rejection, of failure.
4. Risking normally involves a degree of separation anxiety
5.Decide whether the risk is necessary or desirable. Spend some careful thought before acting, so that you will not end up taking unnecessary risks.
6. Risk for the right reasons and when you are calm and thoughtful. Don’t take a risk because you are angry, hurt, depressed, desperate, or frightened. Don’t take risks just to get revenge or to harm someone else. Don’t risk when you are incapable of rational thought.
3. Have a goal. When you take a risk, have a clear purpose in mind so that you will know, after the fact, whether you succeeded or not. What will taking the risk accomplish?
4. Determine the possible loss as well as the gain. That is, know exactly what the consequences of failure will be. Unless you know pretty accurately what both loss and gain will be, you do not understand the risk. There is a tendency either to underestimate or to overestimate the consequences of risk. Underestimation can result in surprising damage, cost, setbacks, pain, whatever. But overestimation is just as problematic,
It’s a good idea in fact to list all the good expected effects of a successful outcome and all the bad expected effects of an unsuccessful outcome.
5. Try to make an accurate estimate about the probability of each case. Is the probability of success one in two, one in ten, one in a hundred, one in a million? This can be sometimes difficult to do, but usually you can guess the probability within an order of magnitude.
6. When possible, take one risk at a time. Divide your actions or goals wherever possible so that you are not combining risks unless absolutely necessary. Simultaneous risking increases anxiety, creates confusion, and makes failure analysis very difficult.
7. Use imaging or role playing to work through the various possibilities, successes and failures, so that you will be mentally prepared for any outcome. Think about what can go right and what can go wrong and how you will respond to or adjust to each possibility.
8. Use a plan. Set up a timetable with a list of steps to take. Use the plan as a guideline, but be flexible.
9. Act decisively. When you have evaluated the risk and decided that it’s worth it, act. Go for it. Don’t hesitate at the threshold or halfway through. Once you get going, be courageous. Grit your teeth and move forward. Don’t procrastinate and don’t act half heartedly.
10. Don’t expect complete success. You may get it, of course, but chances are the result of your risk will not be exactly what you had imagined and there will be more a degree of success than absolute success or failure.
The key take-away is that all of us, when making a decision, need to carefully think through what we absolutely need to know in order to make a good decision, rather than delaying decision making and leaning on the crutch of more time to gather………There where managers become HamletsImmobilienmakler Heidelberg Makler Heidelberg
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Source by Rabi Jayakumar