Understanding management decision making

Understanding management decision making

1. Decision making is very important for an organisation and a variety of different approaches can be used.

   • Scientific decision making involves using a systematic process for making decision in an objective manner. Such a procedure eliminates the practice of decisions being made on the basis of intuition or a hunch and removes, as far as possible, bias and subjectivity by ensuring that decisions are made on the basis of well-researched, factual evidence. It reduces risk because decisions are based on hard data, and it allows actions to be reviewed and the most effective course of action to be decided. Scientific decision making can often be criticised as being a rather slow process that lacks creativity and which therefore may fail to lead to innovative and different approaches.
     • It is easier to defend a policy that has been developed on the basis of good planning and in co-operation with other managers than one that is based solely on one person's intuition or gut feeling.

2. The scientific approach provides a clear sense of direction. By emphasising the need to set objectives it means that everyone is aiming for the same goals. They must be SMART.

   • Decisions are based on business logic, involving comparisons between alternative approaches and between pros and cons. It is likely that more than one person will be involved in the process, which will reduce the possibility of bias.
     • A scientific approach ensures that decisions are monitored continually and reviewed. Although this will not prevent mistakes, it should limit their impact because problems can be identified quickly.
       • A major advantage is that it is flexible. At any stage in making a decision, the process can be reviewed and changed if circumstances require. If all decisions are based on rational thinking, overall success is more probable.

3. Intuitive approaches to decision making involve individuals making decisions on the basis of a 'hunch' or feeling or instinct. This approach is more likely to be used by small businesses that are owned as a soletrader or partnership. Decisions are not always formed by evidence and will usually be bias and subjectivity, leading to inappropriate or ill-judge outcomes.

   • It is usually the result of problems involved in using a scientific approach to decision making.
     • Scientific approach requires a large collection of data and regular gathering of information to control and review decisions. It can be expensive and hard to justify if there is little risk involved.
       • Following a scientific approach is time consuming as it requires the constant checking and monitoring which means decisions can be delayed.
         • The data collection could be flawed. It may be dated or the original sampling may have a bias. Customers may have just changed their minds.
           • Scientific decisions are based on past information. Decisions may be better if they rely on the instincts of the manager who has a 'qualitative' understanding of the market and can anticipate a change in the trend.