Business Management and Decision Making - Literature review Example

? Sub-Problems in Decision Making of Business Management Table of Contents Introduction Hypothesis Literature Review Methodology of Research Sources of Data Methods for Data Collection Analysis and Interpretation of Data Ethical Considerations References Appendix Business Management and Decision Making Introduction Decision making is one of the integral elements within management of a business or organization. Within an organization, each layer in the hierarchy has different types of decision that need to be undertaken. Theory suggestions that these decisions can be classified into three different types, namely, operational, tactical and strategic decisions. Each type of decision requires differing information references and inputs based on which the decision can be taken by the management. Researchers emphasize on the fact that decision making is simply a rational process or ideology that takes place within any organization. Many studies however, fail to emphasize on the fact that taking a decision involves various stages where formulating a particular decision can take time and effort, and can have multiple variables involved as well. Theorists have developed mathematical models based on averages and probabilities through which alternatives can be evaluated before taking a final decision. These models have been utilized in several industries and in various areas in order to evaluate various alternatives at hand in order to make a decision. In this context, it must be noted that even though these models allow for rational decision making in a scenario where all other variables are constant, environment plays a critical role in how businesses take their decisions. For instance, organizations where dynamism is lacking and munificence is low, it may be noted that decisions may not be as rational as dictated by the mathematical models. In addition, this also leads to problems within the organization such as slacking and taking lower levels of risk when evaluating decisions. Since probability elements in a mathematical model for decision making may also include risk levels, such organizations can face problems in identifying the right level of risk that the organization can actually support. This may lead to issues such as lower confidence while making decisions and therefore, not being able to manage the business successfully (Papadakis, Lioukas, & Chambers, 1998; Singh, 1686). In this context, this research will particularly emphasize on some problems that are related to decision making within organizations, and evaluate why organizations face these particular problems at hand. In addition to that, the research will aim to identify various ways through which organizations can improve their decision making ability based on the answers ascertained through this research for the hypotheses formulated below. Sub-Problems in Decision Making of Business Management 1. The time and place to use programmed or non-programmed decision making is always a problem in business management. 2. Lack of dynamism affects the decision making and becomes a major problem in business management. 3. Lack of munificence negatively affects the ability of the managers to take risk. Thus affects the decision making in business management. Hypothesis Based on the fact that each organization requires a certain level of decision making at each layer within the hierarchy, following problems have been identified in general, pertaining to decision making: 1. Mathematical models for decision making are only useful when undertaking rational decision making. 2. Decision making will not be rational if dynamism within an organization is not present. 3. Risk taking within organizations is reduced when munificence is not present within organizations. This leads to lack of rational decision making at each step within the organization. These hypotheses will be tested within the research, after conducting a detailed primary and secondary research, including review of literature and conducting quantitative research as well. Literature Review Decision making is integral at each layer within any organization. It is important to realize that decision making can be from a very small, operational level where switching off lights to save operational costs may be a decision within the organization; and it can range to a larger, more strategic decision such as cutting costs and tightening the budget through operational measures. Therefore, in this context, Papadakis, Lioukas, and Chambers (1998) have classified decision making into categories under title Strategic Decision Making Processes: The Role of Management and Context to help understand and analyze how decision making needs to be performed in an organization. One of the most popular classifications described in the paper regarding decision making is programmed versus non programmed decisions. Programmed decisions can be classified as those that are operational in nature and mainly part of routine, because of which rational decision making processes or methodologies do not have to be employed (Papadakis, Lioukas, & Chambers, 1998). Moreover, such decisions do not require unusual monitoring by management as these decisions are conducted and implemented in a very structured situation and environment. The authors have explained in this paper that when and where the decision making should be done. Non-programmed decisions on the other hand are such that they require more exercise and analysis based on which the decision would have to be taken. Such decisions require decision making methodologies to be employed in order to come up with a rational alternative that has been accounted for all the risk and return factors (Papadakis, Lioukas, & Chambers, 1998). Thus, these methodologies resolve the problem of time and place of decision making. Amason (1996) in his paper title Distinguishing the Effects of Functional and Dysfunctional Conflict on Strategic Decision Making: Resolving a Paradox for Top Management Teams discussed the issue of dynamism in decision making. He explained that there are other classifications for decision making that include levels and types of decisions, such as, strategic decision making, tactical decision making, and operational decision making levels. These differ based on the resource allocation that is involved in the implementation of each type of decision. Strategic decision making revolves around utilization of resources in order to manage and achieve the objectives of the organization. They are supported and explained through strategic decision making, and fulfilled through the lower levels of decision making such as tactical and operational decisions (Amason, 1996). Tactical decisions are generally more operational in nature as they relate to how strategic decisions will be undertaken and fulfilled within the organization. It is important to realize that theory suggests all objectives of the organization are fulfilled through such tactical decisions and thus rational thinking is critical for fulfillment of objectives. Operational level decision making is even more granular in nature and relates primarily to support decisions that help fulfill tactical decisions at hand. These decisions can help in building and improving efficiencies within business processes and aim at leveraging tactical decisions in order to build efficiency within the organization (Amason, 1996). Castrogiovanni (1991) in his paper titled Environmental Munificence: A Theoretical Assessment explained the problem of munificence in the decision making process as it reduces the risk taking ability of the managers. The author argued that decision making requires a large number of steps determined by the type of decision under question. With increasing difficulty level of the decision at hand, number of steps that have to be consciously undertaken increase as well. Therefore, Castrogiovanni (1991) highlighted that with strategic and tactical decisions, it is important to conduct information collection drives in order to understand the situation at hand, and to discover all the possible alternatives that can be chosen as a decision. He further explained that the next steps involve developing scenarios and alternatives that are possible in the decision making situation at hand. One of these scenarios can play as a decision when a final choice is made by the organization and the management. Evaluation of each alternative then has to be conducted based on the criteria and factors that are involved in the decision. Objectives within the organization also play a major role in helping evaluate each alternative (Castrogiovanni, 1991). Risk management is then the next step towards decision making, where each alternative has to be evaluated against the risks that will be part of the decision. The risk and return analysis is extremely useful in mathematical models through which decisions can be made easier based on how much risk has to be borne against the return being given by each decision alternative. Castrogiovanni (1991) is of the opinion that decision making, particularly rational decision making, can only be undertaken if the organization has munificence and a dynamic nature within its culture and structure. He identified that for decision making to be rational, environment within the organization can play a critical role, as it can help define the factors in play towards decision making. Difficulty arises when it is known that the environment is slack and lacks the dynamism through which decision making may be less rational in nature. In addition to that, organizations also need to understand the level of munificence through which decisions can be rational. Rationality in decision making is lost when organizations fail to cultivate this level of understanding and patience amongst the employees. With lack of this understanding and slack in the dynamic nature of the organization, it is also known that employees lack the ability to take risks. This risk is cultivated when the organization lacks the ability to keep the organization in flux with the changing external environment. As a result, employees do not feel comfortable in taking decisions that may have higher stakes, and this can lead to complacency within the organization as well (Goll & Rasheed, 1997; Prescott, 1986; Priem, Rasheed, & Kotulic, 1995; Singh, 1686; Staw & Swajkowski, 1975). Methodology of Research The ideology behind any research is the philosophy that the researcher employs. The research philosophy that is known is the positivist philosophy and the interpretivism philosophy. The two philosophies imply different methodologies of research that the researcher should utilize. Positivism generally denotes that reality is basically observable and therefore can be studied in terms of the nature of the independent variables. On the other hand, interpretivism relies on conducting research and then interpreting the data collected in order to fully comprehend the variables at hand. In this scenario, interpretivism relates to subjective evaluation while positivism relates to empirical research scenarios. For this particular research, it would be suitable to utilize the philosophy of interpretivism in order to evaluate answers for the research objectives at hand. Sources of Data The research in this particular scenario revolves around discovering the problems within decision making in an organization for which a case study evaluation will be conducted on a single organization in order to understand and discover answers to the research questions. The case study methodology employed will take a sample of managers within the organization and then a questionnaire will be administered to them which will be a source of collecting primary data in the qualitative and quantitative methodologies. Both open and close ended questions will be asked based on which responses will be collected. The sources of data will be chosen through a snowballing technique of sampling within a particular organization in order to finalize the sample and to administer the questionnaire to them. Methods for Data Collection As explained earlier, the data collection will take place through the process of administering a questionnaire to the sample selected. The sample will be requested to answer questions which will be both qualitative and quantitative in nature as a result of which interpretation mechanisms for the answers employed will cater to these questions specifically. The data collected will then be tabulated in accordance with the questions and then sorted so that particular analyses based on the data can take place. Analysis and Interpretation of Data The information taken from the questionnaires will be tabulated such that it can be analyzed through statistical software. This will be critical in helping solve the hypotheses developed earlier, where the hypotheses will then be either nullified or proven true. The data will be analyzed in the form of charts and graphs, and presented in the form of tables to distinguish the answers achieved through the likert scale. The interpretation of the answers from the questionnaires will then be augmented by the literature analysis in order to understand the hypotheses that have been developed in this research earlier. Ethical Considerations It is important to highlight critical considerations pertaining to ethics that may impact the research at hand. The first and foremost ethical consideration with respect to this research is that there are critical aspects with respect to the time available for this research. As a result, it will be difficult to conduct a deep rooted research and obtain results for the questionnaire. In this regard, to counter this problem, the sample to be made will be done through snowballing technique. Through this method, the sample will be easily made and conducting this research will be easier. Another consideration for this research is that the researcher is biased against the nature of the research since it is a belief that decision making is not an easy task. Therefore, management will not be able to take decisions without affecting or implicating other variables at hand. These direct or indirect variables that may affect the decision’s outcomes cannot be controlled. Therefore, despite all measures undertaken to conduct this research, this bias may come into play. In order to counter this bias, the research will not be self-administered, rather, the questionnaires will be given to the respondents to fill out on their own without giving them any explanation on the research or the questionnaire. In this regard, the questionnaires will also be made self-explanatory so that the respondents have a fair idea on how to solve the questionnaire. References Amason, A. C. (1996). Distinguishing the Effects of Functional and Dysfunctional Conflict on Strategic Decision Making: Resolving a Paradox for Top Management Teams. The Academy of Management Journal, 39(1), 123-148. Castrogiovanni, G. J. (1991). Environmental Munificence: A Theoretical Assessment. Academy of Management, 16, 542-565. Child, J. (1972). Organization Structure, Environment and Performance: The Role of Strategic Choice. Sociology, 6, 1-22. Finkestein, S., & Hambrick, D. C. (1990). Top Management Team Tenure and Organizational Outcomes: The Moderating Role of Managerial Discretion. Administrative Science Quarterly, 35, 505-538. Goll, I., & Rasheed, A. M. (1997). Rational decision-making and firm performance: the moderating role of the environment. Strategic Management Journal, 18(7), 583-591. Papadakis, V. M., Lioukas, S., & Chambers, D. (1998). Strategic Decision Making Processes: The Role of Management and Context. Strategic Management Journal, 19(2), 115-147. Prescott, J. E. (1986). Environments as Moderators of the Relationship Between Strategy and Performance. Academy of Management Journal, 29(2), 329-246. Priem, R. L., Rasheed, A., & Kotulic, A. G. (1995). Rationality in strategic decision processes, environmental dynamism, and firm performance. Journal of Management, 21, 913-929. Singh, J. V. (1686). Performance, Slack, and Risk Taking in Organizational Decision Making. The Academy of Management Journal, 29(3), 562-585. Staw, B. M., & Swajkowski, E. (1975). The Scarcity Munificence Component of Organizational Environments and the Commission of Illegal Acts. Administrative Science Quarterly, 20, 345-354. Appendix 1. Name 2. Designation 3. Number of Years of Experience 4. Type of Decisions Taken a. Tactical b. Strategic c. Operational 5. Nature of Risk Taking a. Risk Averse b. Risk Taker c. Neutral to Risk 6. Nature of Understanding Between Employees a. Extremely Good b. Good c. Neither Good Nor Bad d. Bad e. Extremely Bad 7. Dynamic Nature of the Organization Against Environment a. Extremely Good b. Good c. Neither Good Nor Bad d. Bad e. Extremely Bad 8. Do you think risk taking should be present in decision making? Yes No 9. Why? 10. Do you think understanding between employees should be present in decision making? Yes No 11. Why? 12. Do you think dynamic environment should be present in decision making? Yes No 13. Why? Read More