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Thursday, April 27, 2017

MODELS OF DECISION MAKING

In previous article (Decision making process) you have learnt what the different phases of a decision making process are, what types of decisions you are likely to make in an organisation and under what states of nature these decisions are made. Now, we are going to examine three suggested models of the decision making process which will help you to understand how decisions are made and should be made. These three models are:
(1) The econologic model, or the economic man,
(2) The bounded rationality model or the administrative man; and
(3) The implicit favorite model or the game man.

You will notice that each model differs on the assumptions it makes about the person or persons making the decision.

1) Econologic Model or Economic Man Model
The econologic model represents the earliest attempt to model decision process. Briefly, this model rests on two assumptions: (1) It assumes people are economically rational; and (2) that people attempt to maximise outcomes in an orderly and sequential process. Economic rationality, a, basic concept in many models of decision making, exists when people attempt to maximise objectively measured advantage, such as money or units of goods produced. That is, it is assumed that people will select the decision or course of action that has the greatest advantage or payoff from among the many alternatives. It is also assumed that they go about this search in a planned, orderly, and logical fashion.


A basic econologic decision model is shown in Figure V. The figure suggests the following orderly steps in the decision process:
1 Discover the symptoms of the problem or difficulty ;
2 Determine the goal to be achieved or define the problem to be solved;
3 Develop a criterion against which alternative solutions can be evaluated;
4 Identify all alternative courses of action;
5 Consider the consequences of each alternatives as well as the likelihood of occurrence of each;
6 Choose the best alternative by, comparing the consequences of each alternative (step 5) with the decision criterion (step 3); and
7 Act or implement the decision(best alternative).

The economic man model represents a useful prescription of how decisions should be made, but it does not adequately portray how decisions are actually made. If you look closely in this prescriptive model you shall be able to recognise some of the assumptions it makes about the capabilities of human beings:
First, people have the capability to gather all necessary information for a decision, i.e., people can have complete information;
Second, people can mentally store this information in some stable form, i.e., they can accurately recall any information any time they like;
Third, people can manipulate all this information in a series of complex calculations design to provide expected values; and
Fourth, people can rank the consequences in a consistent fashion for the purposes of identifying the preferred alternative.

As you can possibly imagine, the human mind is simply incapable of executing such transactions at the level and magnitude required for complex decisions. To that extent, this model is unrealistic. However, due to the advent of sophisticated data storage, retrieval and processing machines, it is now possible to achieve economic rationality to some extent.

2) Bounded Rationality Model or Administrative Man Model
An alternative model, one not bound by the above assumptions, has been presented by Simon. This is the bounded rationality model, also known as the administrative man model.

As the name implies, this model does not assume individual rationality in the decision process. Instead, it assumes that people, while they may seek the best solution, usually settle for much less because the decisions they confront typically demand greater information processing capabilities than they possess. They seek a kind of bounded (for limited) rationality in decisions.

The concept of bounded rationality attempts to describe decision processes in terms of three mechanisms:
Sequential attention to alternative solutions: People examine possible solutions to a problem sequentially. Instead of identifying all possible solutions and selecting the best (as suggested in the econologic model), the various alternatives are identified and evaluated one at a time. If the first solution fails to work it is discarded and the next solution is considered. When an acceptable (that is, `Good enough and not necessarily the best) solution is found, the search is discontinued.

Use of heuristics: A heuristic is a rule which guides the search for alternatives into areas that have a high probability for yielding satisfactory solutions. For instance, some companies continually select Management graduates from certain institutions because in the past such graduates have performed well for the company. According to the bounded rationality model, decision makers use heuristics to reduce large problems to manageable proportions so that decisions can be made rapidly. They look for obvious solutions or previous solutions that worked in similar situations.

Satisfying: Whereas the econologic model focuses on the decision maker as an optimizer, this model sees him or her as a satisfier. An alternative is optimal if: (1) there exists a set of criteria that permits all alternatives to be compared; and (2) the alternative in question is preferred, by these criteria, to all other alternatives. An alternative is satisfactory if: (I) there exists a set of criteria that describes minimally satisfactory alternatives; and (2) the alternative in question meets or exceeds all these criteria.



Based on these three assumptions about decision makers, it is possible to outline the decision process as seen from the standpoint of the bounded rationality model. As shown Figure VI, the model consists of eight steps:
1 Set the goal to be pursued or define the problem to be solved.
2 Establish an appropriate level of aspiration or criterion level (that is, when do you know that a solution is sufficiently positive to be acceptable even if it is not perfect'?)
3 Employ heuristics to narrow problem space to a single promising alternative.
4 If no feasible alternative is identified (a) lower the aspiration level, and (b) begin the search for a new alternative solution (repeat steps 2 and 3).
5 After identifying a feasible alternative (a), evaluate it to determine its acceptability (b).
6 If the identified alternative is unacceptable, initiate search for a new alternative solution (repeat steps 3-5).
7 If the identified alternative is acceptable (a) implement the solution (b).
8 Following implementation, evaluate the ease with which goal was (or was not) attained (a), and raise or lower level of aspiration accordingly on future decisions of this type.

As can be seen, this decision process is quite different from the econologic model. In it we do not seek the best solution; instead, we look for a solution that is acceptable. The search behaviour is sequential in nature(evaluating one or two solutions at a time). Finally, in contrast to the prescriptive econologic model, it is claimed that the bounded rationality model is descriptive; that is it describes how decision makers actually arrive at the identification of solutions to organisational problems.

3) Implicit Favourite Model or Gamesman Model
This model deals primarily with non-programmed decisions. You will recall that non-programmed decisions are decisions that are novel or unstructured, like seeking one's first job. Programmed decisions, in contrast, are more routine or repetitious in nature, like the procedures for admitting students to a secondary school.

The implicit favourite model developed by Soelberg (1967) emerged when he observed the job choice process of graduating business students and noted that, in many cases, the students identified implicit favourites very early in the recruiting and choice process. However, they continued their search for additional alternatives and quickly selected the best alternative candidate, known as the confirmation candidate. Next, the students attempted to develop decision rules the demonstrated unequivocally that the implicit favourite was superior to the alternative confirmation candidate. This was done through perceptual distortion of information about the two alternatives and through weighing systems designed to highlight the positive features of the implicit favourite. Finally, after a decision rule was derived that clearly favoured the implicit favourite, the decision was announced. Ironically, Soelberg noted that the implicit favourite was typically superior to the confirmation candidate on only or two dimensions. Even so, the decision makers generally characterized their decision rules as being multi-dimensional in nature.


The process is shown in Figure VII. As noted, the entire process is designed to justify to the individual, through the guise of scientific rigour, a non-programmed decision that has already been made in intuitive fashion. By doing so, the individual becomes convinced that he or she is acting in a rational fashion and making a logical, reasoned decision on an important topic.

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DECISION MAKING PROCESS


Making decisions has been identified as one of the primary responsibilities of any manager. Decisions may involve allocating resources, appointing people, investing capital or introducing new products. If resources like men, money, machines, materials, time and space were abundant, clearly any planning would be unnecessary. But, typically, resources are scarce and so there is a need for planning. Decision making is at the core of all planned activities. We can ill afford to waste scarce resources by making too many wrong decisions or by remaining indecisive for too long a time.

THREE PHASES IN DECISION MAKING PROCESS
You can define decision making as the process of choosing between alternatives to achieve a goal. But if you closely look into this process of selecting among available alternatives, you will be able to identify three relatively distinct stages. Put into a time framework, you will find:
1. The past, in which problems developed, information accumulated, and the need for a decision was perceived;
2. The present, in which alternatives are found and the choice is made; and
3. The future, in which decisions will be carried out and evaluated.

Herbert Simon, the well-known Nobel laureate decision theorist, described the activities associated with three major stages in the following way:
1. Intelligence Activity: Borrowing from the military meaning of intelligence Simon describes this initial phase as an attempt to recognise and understand the nature of the problem, as well as search for the possible causes;
2. Design Activity: During the second phase, alternative courses of action are developed and analyzed in the light of known constraints; and
3. Choice Activity: The actual choice among available and assessed alternatives is made at this stage.
If you have followed the nature of activities of these three phases, you should be able to see why the quality of any decision is largely influenced by the thoroughness of the intelligence and design phases. Henry Mintzberg and some of his colleagues (1976) have traced the phases of some decisions actually taken in organisations. They have also come up with a three-phase model as shown in Figure I.

Figure I: Mintzberg's empirically based phases of decision making in organizations


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Thursday, February 23, 2017

MANAGEMENT OF ORGANISATION

Why is an organization created? What is its purpose? How best can it achieve that purpose? What methods and means will it employ to achieve the purpose? Various terms and concepts of mission, objectives, strategy, policy, programmes and procedures which will help you understand the management of organizations.

1.  MISSION
The mission is the very reason and justification for the existence of a firm. Mission is always defined in terms of the benefits the firm provides to its customers and not in terms of any physical dimensions of the firm or its products.

A firm exists and functions only in relation to the customer whose need(s) it satisfies.. If there were no customers there would be no firm. Thus the starting point for, defining the mission of any business is its customer. Since the customer exists outside the business, the mission must be defined from the outside. The firm must ask the questions "What is our business?" and "What should it be?" but seek the answer from the customer's viewpoint.

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Monday, December 19, 2016

LEVELS OF MANAGERS

A manager is responsible for combining and coordinating the people, the technology, the job task and other resources to effectively achieve the objectives of an organisation. You may be a manager in charge of constructing a plant or managing a bank or supervising a group of life insurance agents or training a football team. In most of the situations, you have others who are your subordinates reporting to you. The subordinates themselves may be managers having subordinates below to report to them. Therefore, we talk of levels of managers in an organisation.

The First Level Managers: These managers are in direct contact with the employees, who usually produce the goods or service outputs of an organisation. They are referred to as supervisors or foremen in some organisations. You may be associated with the employees who directly produce goods or render service outputs. Hence, your may belong to the first level managers. In some government offices, the superintendent of the office supervising the work of typists, despatch clerks, etc. belongs to this category. In the industry, it is the foreman, who is in direct contact with the rank-and-file workers, producing goods or services.

The Middle Level Managers: These managers are those with a number of responsibilities and linking or connecting activities. They direct the activities of the first level managers. For example, a district educational officer or a block development officer belongs to the middle level with the principals of schools and gram servers reporting to the district educational officer and block development officer respectively.

The Top Level Managers: The top level managers are a small group of policy makers responsible for the overall strategic management of the organisations. It is the responsibility of the top managers to develop the objectives and strategies of the organisation. It is the top management that must sense the demands of the political, social and competitive environments on the organisation. A President or a Chief Executive or a District Magistrate are examples of top managerial level.

THE MANAGERIAL SKILLS AT VARIOUS LEVELS

These skills refer to the personal ability put to use by the manager in specific position that he or she holds in the organisational hierarchy.

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Sunday, December 11, 2016

MANAGEMENT SKILLS

An effective manager needs skills to plan, control, organise, lead, and finally to take decisions. In each case, a manager must exercise a unique set of skills.

1. PLANNING SKILLS
As part of the management process you attempt to define the future state of your organisation. You are not trying to predict the future, but rather to uncover things in the present to ensure that the organisation does have a future. Hence planning skills will include:
·         being able to think ahead;
·         ability to forecast future environmental trends affecting the organisation;
·         ability to state organisational objectives;
·        ability to choose strategies that will help in attaining these objectives with respect to future trends; and
·  ability to arrive at performance standards or yardsticks for monitoring the implementation of these strategies, etc.

With growing complexity in the operations of large organisations, managers are expected to acquire skills to interact with intermediate planning systems such as a computer.

2. ORGANISING SKILLS
As you have seen, planning specifies the future course of direction of an organisation. The organising process follows the planning process. 'While planning specifies what will be achieved when, organising specifies who will achieve what and how it will be achieved.

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Tuesday, December 6, 2016

MANAGEMENT PROCESSES

Four important management processes are planning, controlling, organizing and leading. Decision making is an integral part of management process as all the other four processes involve Decision making. A particular manager may be more concerned with say, controlling and organising, while another may be more concerned with planning. The degree of involvement with each of these processes may vary from manager to manager, but essentially all managers have to be concerned with these processes. We shall first take up the planning process because only when there is planning can the other processes follow in logical sequence.

PLANNING

Planning is the most basic and pervasive process involved in managing. It means deciding in advance what actions to take and when and how to take them.

Planning is needed, firstly for committing and allocating the organisation's limited resources towards achieving its objectives in the best possible manner and, secondly for anticipating the future opportunities and problems.


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Monday, December 5, 2016

MANAGEMENT SYSTEMS

THE SYSTEMS CONCEPT

Every practising manager knows from experience that whatever actions and decisions he takes, in any particular area of activity, have results which extend well beyond that specific activity. The impact of decisions in some cases affect the whole organization and even external environment. A simple decision to throw out an inefficient, lazy worker can trigger off union activity which can, in extreme situations, even result in strike. The situation may become so hot that the union forces the neighbouring units also to join the strike. Thus when a manager takes a decision he never views its impact in isolation but tries to understand and anticipate its repercussions on the entire organisation and the environment. The manager understands that his organisation is a totality of many, inter-related, inter-dependent parts, put together for achieving the organisational objectives. This in a nutshell is the very essence of the systems concept.

A system is defined as a sum total of individuals but inter-related parts (sub-systems), and are put together according to a specific scheme or plan, to achieve the pre-stated objectives.

A system has the following components:
1.   A number of parts of sub-systems which when put together in a specific manner form a whole system
2.   Boundaries within which it exists
3.   A specific goal or goals. This goal is expressed in terms of an output which is achieved by receiving input and processing it to form the output
4.   Close inter-relationship and inter-dependency amongst the various sub-systems

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Sunday, December 4, 2016

RESPONSIBILITIES OF PROFESSIONAL MANAGER

A firm is a social institution. Its very existence is dependent upon its harmonious relationships with various segments of the society. This harmonious relationship emanates from the firm's positive responsiveness to the various segments and its closely associated with the tasks a manager is expected to perform. The process of evolving this mutual relationship between firms and various interest groups begins by acknowledging the existence of the responsibilities of a manager. These responsibilities are towards customers, shareholders, employees, suppliers, distributors and retailers, competitors, unions, government and society.

1.   RESPONSIBILITY TOWARDS CUSTOMERS
The manager must always remember that the customer comes first. The starting point for the business firm is an understanding of the needs of the customer, and the firm's foremost responsibility is towards the customer.


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TASKS OF PROFESSIONAL MANAGER

There is a lot of confusion over the much widely used terms-professional management and professional managers. Some researchers contend there is nothing like professional management. Management is a discipline. There are practitioners of this discipline who practise management as a profession and thus are, professional managers. Just as there are doctors and lawyers by profession similarly there are professional managers. As doctors practise medicine, managers practise management. The only difference between professional managers and other professionals is that, while the latter must possess a formal degree in their discipline, a professional manager need not have a formal degree or education in management. He may have learnt the necessary skills and gained competence from his experience.

The second characteristic of a professional manager is that his primary concern is the organisation or the company with which he works. This is true whether the manager works for a private or public sector or a multinational company; whether he is the executive director or the personnel manager reporting to the executive director. The professional manager always has his company's overall perspective in his mind and all his actions are guided by the company's objectives.

The third and the most important characteristic of a professional manager is that he is responsible for performance. Managing involves collecting and utilising resources (money, men, materials and machines) in the most optimal manner for achievement of some pre-determined objectives or results. It is the professional manager's responsibility to utilise resources to produce the required results. Responsibility and performance are really the key words in defining a manager's role. Performance implies action, and action necessitates taking specific steps and doing certain tasks. Let us first take up the various tasks which a manager is expected to do to produce results.

1.   PROVIDING PURPOSEFUL DIRECTION TO THE FIRM
A manager can be compared to the captain of a ship who has first to set the course to reach the destination and then steer the ship along the course. Similarly, a manager has to, first of all, set objectives which the firm must achieve. Objectives provide the direction in which the firm must move. Having decided upon the objectives, the manager must constantly monitor the progress and activities of the firm to ensure that it is moving in the desired direction. This is the first and foremost task of every manager.

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Saturday, December 12, 2015

TECHNOLOGY FORECASTING

Technological forecast is a prediction of the future characteristics of useful machines, 'products, processes, procedures or techniques. There are two important points implied in this statement, viz.:

a) A technological forecast deals with certain characteristics such as levels of technical performance (e.g., technical specifications including energy efficiency, emission levels, speed, power, safety, temperature, etc.), rate of technological advances (introduction of paperless office, picture phone, new materials, costs, etc.). The forecaster need not state how these characteristics will be achieved. His forecast may even predict characteristics which are beyond the present means of performing some of these functions. However, it is not within his scope to suggest how these limitations will be overcome. Find the pefect HR software vendor. 
b) Technological forecasting also deals with useful machines, procedures, or techniques. In particular, this is intended to exclude from the domain of technological forecasting those items intended for pleasure or amusement since they depend more on personal fads, foibles or tastes rather than on technological capability. Such items do not seem to be capable of rational prediction and thus the technology forecaster generally does not concern himself/herself with them.


Table-1 : Technology Forecasting Methods and Techniques 

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Sunday, December 6, 2015

INFORMATION TECHNOLOGY REVOLUTION

Information Technology synthesises the convergence of previously distinct and separate technologies. As is clear from Figure-1 below, developments in computer technology, electronic components technology and the communications technology along with appropriate software have converged and are now known by the catchword Information Technology' (IT). Information Technology refers to `a very wide range of elements which are utilised to create, transfer, transform and convey information through means, irrespective of whether these elements are in the form of equipment, services or know-how'. Developments in information technology have already produced vast gains in productivity resulting in counter inflationary trends in prices as well as substantial improvements in technical performance of many products and services. 



Figure-1 : Convergence of Components, Computers and Communications

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TECHNOLOGICAL CHANGE EFFECT ON PRODUCTION FUNCTION

Technological change has been defined broadly as “the process by which economies change over time in respect of the products and services they produce and the processes used to produce them" and more specifically as alteration in physical processes, materials, machinery or equipment, which has impact on the way work is performed or on the efficiency or effectiveness of the enterprise. Technological change may involve a change in the output, raw materials, work organisation or management techniques but in all cases it would affect the relationship between labour, capital and other factors of production.

PRODUCTION FUNCTIONS AND TECHNOLOGICAL CHANGE

'A production function attempts to specify the output of a production process (as a function of the various factors of production e.g., labour, capital, technology, management or organisation and land). It may be possible to explicitly state the nature of this function based on econometric studies but that is not our interest at present. We would like to understand the role of technology in the production process and for that purpose we would like to begin with the isoquant approach. An isoquant specifies a range of alternative combinations of two factors of production, say labour and capital, which can be used to produce a given quantity of the output and is based on the assumption that the other factors of production e.g. the state of knowledge of technology is constant.


Figure 1 : Isoquants and factor substitution 

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Thursday, December 3, 2015

TECHNOLOGY DEVELOPMENT STRATEGIES

For all the countries, the most practical strategy for technology development-is to ‘make some and buy some'. This gives the advantage of selecting an appropriate area of specialisation and the potential to exploit the technology trade in the international market place.

The complex process of technology development is schematically presented in Figure-1.

The technological needs are derived from national socio-economic goals. A country's technology development strategy is then determined by combining these identified technological needs with potential technological developments in the world and a thorough assessment of available and emerging technologies. Then the Country determines a strategy to import technologies, which it cannot practically develop itself and identifies technologies, which can be produced locally. Now, there is a universal realisation that unless a concerted attempt is made to build local technological capabilities for absorbing imported technologies, any attempt to develop indigenous technologies encounters enormous difficulties. Even with regard to imported technology, it is essential for a country to be able to select, digest, adapt and improve it for local consumption. All of these efforts justify greater priority and allocation of resources to R&D. A pre-requisite for effective utilisation of R&D resources is the 'development of technological infrastructure within the country, including institution building, manpower development, provision of support facilities and creation of an innovative climate.


Figure 1  : The process of Technology Development
Source: Technology for Development, UN-ESCAP

The following general principles with regard to the planning for development of indigenous technological capabilities may be kept in view:

i) It is important to be selective in self-development of technology. Emphasis should be given to total integration of all activities in the technology production chain to achieve self-reliance.
ii) In selecting areas for development, a country can be inward looking in some areas and outward-looking in some other areas.
iii) Import substitution can only be a temporary strategy.
iv) In the technology production chain, a number of activities involving basic and applied research can be undertaken, but it is important to be able to discard some of the non-productive projects and concentrate, from time to time, upon those which have high commercial potential.
v) Technology development is best achieved through collective effort. Individuality, which tends to aim at being unique rather than practical, should be minimised.



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