Main Factors in the Decision and Management, Study Says
To make a smart managerial decision with the lowest amount of risk, there are several factors influencing decision making to take into consideration. By taking a close look at the various researches in this specific area, it’s now much easier to explain the importance of the theoretical foundation in evaluating factors influencing decision making.
In a system context, some situations that yield problems. Since humans guide this system, a methodology that is used to analyze factors affecting decision making needs to be structured perfectly. It should be able to help the person who is making the decision to utilize efficaciously his powers of reasoning.
As this world is constantly progressing and evolving, ways to deal with management have changed and it’s crucial to look at things from a different angle. For someone to make up his mind about something, he is obligated to recognize, confront and think through every possible choice, plan and unpredictability.
Results of existing studies
There are many studies focused on the programmed decision making process done between the 1950s and 1970s. They could be divided into two separate groups, depending on their objectives:
- Judgment – focuses on the conduction of the decision when people are faced with a chance of unpredictable situations
- Choice – focuses on the decision-making technique when people are faced with several options
These kinds of studies became more and more popular, resulting in expanding to other fields, such as finance, management and economics. Throughout various stages of the process of making a decision, some of the interesting factors affecting decision making were discovered:
- Effects of certainty, reflection and anchoring
- Regret theory
- Excessive confidence
Nowadays, the most common paradigm is explained through several steps. In the beginning, it’s significant to emphasize the importance of the exact field identification and to create the traditional model.
Afterward, the dissimilarity of the theory and reality needs to be acknowledged. In this step, a person’s psychological and cognitive competence plays a crucial role.
Next, the model from the first step is obtained due to the different additional variables. Furthermore, to discover a new corollary, a new empirical model needs to be conducted.
The relevance of the decision-making studies
The core of management is proven to be the programmed decision making process. Therefore, it’s infiltrated in every organizational activity.
Moreover, there are management schools that use traditional methods to include this process into planning. Therefore, the decision-making function is suitable for every management, not just some selected companies.
Simon emphasizes in his study three different management actions that come into play when it comes to successful scientific management:
- Decision execution
- Decision formulation
- Scientific method and model
A scientific approach to making decisions
Three main methods are used to gain powerful theoretical insight. First is the literature research method, the second is the quantitative analysis method and the last one is the comparative analysis method. By applying them, researchers have a precisive and a complete view of the subject of interest.
Also, a good understanding of risk management can help to identify and evaluate every possible risk that may occur during the process. It’s followed by a coordinated application of many different resources that help to reduce the possibility of unfortunate situations.
One more important factor is the causal model. It analyzes the connection between key factors affecting operations management and its goal. Besides, it examines what effects may occur on the objective caused by different variables.
Analysis of the projects
One thing is for sure, it’s easier to make a decision when you know that every possible factor is certain and when you don’t have to adjust a thing. Furthermore, a careful selection of projects plays a significant role. It will be effortless to manage and it will aid in the decision-making process.
Also, a person who is making decision needs to be careful with issues that may occur with the contract. There is always a possibility that something unpredictable might happen. Due to this fact, the decision has to be flexible to be successful in spite of unexpected issues.
The bad arrangement between time and cost can yield crashing decision. When task times and deadlines are tight, the execution process may suffer. To avoid this situation, robust optimization techniques may be very useful.
They could help in linear decision rules development. Like we’ve said before, the thing that has the most unfavorable effect on the decision-making process is unpredictability. Therefore, any method that can be used to avoid it should be implemented.
Moreover, the decision-maker needs to be capable to know with is the right project for his management skills. If he chooses it right, the process will be easy to perform. The focus should be on these main areas:
- Expected return
- Probability of underperformance
- Variance subject to meeting the target
- Safety-first ratio
Allocation of resources
To accomplish the desired goals, it’s important to share every resource collectively. Every part of the project will benefit from it. This is considered as a cooperative game that requires compensation to succeed.
If the manager of the project doesn’t have complete information, it’s influential in estimating costs. Also, the task operator has to examine the probability of utilizing strategic information.
Outsourcing is the buzzword. Wherever possible, outsource the not-so-important business processes and focus on the core business areas with your best managers handling the key tasks.
Allocating the workforce to the right tasks and having a good organizational chart is the key.
In case of an accident, it’s beneficial that the decision has the quality of being agile. It values persons and their connection instead of processes and different tools, software and not documentation, collaboration amongst customers and not negotiation through the contract, and flexibility over following a certain plan.
This approach is applicable especially for those projects where the final form is unknown at the start of the process. These are called ‘nondeterministic projects.’ Some of them are research, software and pharmaceutical drug development. However, this method is harder to apply to bigger projects.
No matter what job we do, we need to follow how the modern world changes if we want to be successful. If we start lacking, it’s most certainly that we’ll fail. Right decisions by the right authority at the right time holds the key here.
The workforce and the role of leadership
Much more than technology, the most crucial resource is your workforce and, therefore, making a decision that fits out talents will bring on numerous benefits. We need to stay innovative and to avoid projects that will bring us back to the ‘narrow-minded’ period. Only with inventive projects that break new grounds, we will progress.
If a decision turns out to be incorrect, it’s due to the big chain of decisions made in the past. A decision-maker is one of the key factors affecting operations management and development of the whole company and it determines whether the leadership will fail or succeed.
Also, it directly affects the relationships between leaders and workers. The scientific decisions must be assessed by the leaders and implemented the right way.
The hypotheses presented in this study were carefully examined and supported to confirm previous studies. After all of the presented facts, we can say with certainty that every unpredictable situation that occurs endangers the decision-making process and yields plenty of obstacles that may slow down even more the process.
Carefully selected decisions, management policy, understanding of possible issues, flexibility and using different methods will be out of help. Many influences could decide whether the decision will be right or wrong, but many of them are in the hands of the decision-maker. If he does his research the right way and puts most of the attention on scientific management, there will be most likely no problems.
Reference: Sun Longyin, Christian Bach. (2014). Influencing Factors in the Decision and Management Sciences
Robert Everett is a management consultant helping small businesses and startups to reach new heights with his expertise at Edu Birdie. He has authored many books on leadership and management and trains young entrepreneurs to be the future leaders. When he’s off the work, he loves to cook Mediterranean cuisine, go out RVing and throwing parties for his friends at his farmhouse.