(Online Course) Pub Ad for IAS Mains: Chapter: 3 Administrative Behavior - Decision Making (Paper -1)

Decision Making

Of all the problems in management, the problem of-’decision making’ is the most difficult one. Even in ordinary life, ‘to do or not to do’ is one of the most important riddles that an individual faces before leaping to action just like Shakespearean hero Macbeth. Macbeth runs about for advice and guidance, for consultations and suggestions and ultimately when he comes to take a decision, he gets too late and changes his mind.

But can an organisation take decision the way we the people take? Can they keep pending for long period? In business, decisions have to be taken very quickly, in Public Administration, however, decision-making is not as easy as in business and we can’t keep things pending indefinitely. In Public Administration what we need is right decision.

Decision making in Public Administration is not free from outside influences. All types of pressures, direct and indirect, exert themselves and a decision may have to be taken much to the displeasure and disapproval of the decision maker. On the other hand, business administration is much more free from outside pressures.

Effective management, of private or public organizations, believes in making right and responsible decisions. A good leader is the one who can decide, who can solve the problem ‘to do or not to do’, and who can willingly undertake the responsibility for making decisions. Responsibility is a burden which most of us do not carry well, which most of us are not willing to accept. But effective leadership means that decisions must be made and responsibility accepted.

No human being is perfect. Not all his decisions can please every one how much it is near to perfection may be. Simon views all the problems of organization in its total social and psychological context and believes that decision-making is not necessarily-rational. He says, “Thus the members of an organization are not to be viewed as mere mechanical instrumentalists. They must be regarded as individuals who have wants, motives and desires, and are limited in their knowledge and in their capacities to learn and to solve problems”. Besides that there are other problems, how much time and how much energy should be devoted to making each decision. In fact, there is too little time for too many problems.

Meaning

Decision-making is defined “as selection of a course of action from among alternatives, and it covers matters relating to planning, organizing, directing, staffing and controlling”. A decision is an act of choice wherein an executive forms a conclusion about what must be done in a given situation. Terry defines, “A decision is usually made within the guides established by policy. A policy is relatively extensive, affects many problems and is used again and again. In contrast a decision applies to a particular problem and has a non-continuous type of usage.” He says that policy itself is the product of a decision. Decision is a means: it is not an end in itself. Decisions have to be made and remade in the light of the ends to be achieved. Decisions are not permanent in so far as they have to take cognizance of the changed circumstances. Decisions have to be responsive to varying situations.

A decision represents a course of behaviour chosen from a number of possible alternatives. Following aspects of human behaviour are involved in decision-making:

1. Cognition, those activities of the mind associated with knowledge,

2. Contain, the action of the mind implied by such word as ‘willing’, ‘desire’, and ‘aversion’; and

3. affection, the aspects of the mind identified with emotion, feeling, mood and temperaments.

Based on these facts, decision making has been defined as “a conscious and human process, involving both individual and social phenomena, based upon factual and value premises, which concludes with a choice of one behavioral activity from among one or more alternatives with the intention of moving toward some state of affairs.”

Decision making has following characteristics: decision -making is a process of selection and the aim is to select the best alternative, decision is aimed at achieving the objectives of the organization if it is made in organizational context, it also involves evaluation of available alternatives because only through this evaluation one can know the best alternative, decision making is a mental process because the final decision is made after thoughtful consideration, decision involves rationality because through decision, one tries to better one’s happiness, and decision making involves a certain commitment. This commitment may be for short run or long run depending upon the type of decision.

Types of Decisions:

1. Organisational and Personal Decisions: In an organization, when an individual takes decisions as an executive for the organization, these are known as organizational decisions. Taking such decisions can be delegated from a superior to a subordinate. Such decisions affect organizational functioning directly.
An executive can take decisions about himself, which are personal decisions. These decisions normally affect personal life of the decision maker, though at many times they may affect organisation also. Decision making power can’t be delegated to anyone else in the case of personal decisions.

2. Routine and Strategic Decisions: Routine decisions are taken in the context of day-to-day operation of the organisation. Mostly they are of repetitive nature and related with the general functioning. Authority for taking these decisions is generally delegated to lower levels in the organisation.
Strategic decisions are those, which are taken during the current time period, but those primary effects are felt during some future period. It affects organizational structures, objectives, facilities and finances. These decisions are taken comparatively at higher level of management.

3. Policy and Operative Decisions: Policy decisions are taken by top management in the organization, which determines the basic policies. The policy decisions, are very important and have long­term impact. Operative decisions are related with the day-to-day operation of the business.

4. Programmed and Non-programmed Decisions: A programmed decision is applied to structured or routine problems. It is normally of repetitive nature and is taken within the broad policy structure. These generally have short-term impact and are taken by lower level managers.
Non-programmed decisions are used for unstructured, novel and ill-defined situations of a non-recurring nature. The necessity of such decisions arises because of some specific circumstances.

5. Individual and Groups Decisions: Individual decisions are taken by a single individual. These are taken in the context of routine or programmed decisions where the analysis of various variables is simple or for which broad policies are already provided.
Group decisions are taken by a group constituted for this specific purpose or by a standing committee. Group decisions have a certain positivevalues such as greater participation of individuals and quality in decisions, and certain negative values such as delay in decision making process and difficulty in fixing the responsibility of decisions

Factors in Decision Making

Millett refers to three aspects, which must be considered in order to understand decision-making process.

1. Personal differences: There are differences in the personal qualities of individuals, which make some decisive and others indecisive. “We must observe the personal differences among men and women which enable some to be decisive and others indecisive. Some are willing to make choices and abide by the consequences and other prefers to avoid clear-cut choices. We don’t know now why there should be these differences are due to social and professional environment in which they are developed. Barnard has analyzed the limitations intellectual as three fold:

1. he may be irresponsible;

2. he may be non­decisive; and

3. he may be non-persuasive.

2. Role of knowledge: Decision-making depends upon the availability of facts and necessary data. “The careful accumulation of detailed facts, their analysis and interpretation, the use of broad concept of human and physical behaviour to predict future developments - all these elements is the use of knowledge enters into decision making in varying degree.”
According to Simon critical factors in the decision process are (i) the availability of information and (ii) the computational capacities available to deal with the information.

3. Institutional and Personal factors: There are institutional limitations, which circumscribe decision-making. “On the other hand, decision making must consider the aspirations, traditions and attitudes of the agency administering government work. On the other hand, there are personal predilections among administrators which also limit decision making.” In a democratic society, like ours, decisions are highly circumscribed because the administration has to carry people with and not to exist in some sort of ivory tower.

Decision Making Process

The decision-making requires a process through which a decision maker has to go either explicitly or implicitly.

1. The Problems: The first step is to determine what real and correct problem is and to find out a satisfactory answer and what inputs data is required for this. This step may be divided into two parts: Diagnosis and Analysis.
Diagnosis is the process of identifying disease from its signs and symptoms. Symptoms occupy an essential place in the problem solving process; they signal the existence of problems and guide the search for underlying problem. Correct diagnosis gives correct identification of disease and consequently through correct medicine disease is removed.
The analysis of the problem requires finding out who would take decision without information would be required and from where these would be available. It helps to gain an insight into the problem.

2. Search for alternatives: The managers, in order to get most satisfactory result of a decision, must try to find out the various alternatives available. Search for alternative is the best guarantee for ensures adequate attention on the part of managers. It also avoids tension, as alternatives are available if a decision goes wrong. But most important is, the elements in the various alternatives should be taken as the base for analyzing these alternatives.

3. Evaluation of alternatives: Once appropriate alternatives have been found, the next step is planning to evaluate them and select the one that will best contribute to the goal. This is the point of cultivate decision-making.For achieving an objective, people are likely to think exclusively of quantitative factors. These factors can be measured in numerical terms, such as time or various fixed and operating costs. Qualitative or intangible factors are those that are difficult to measure numerically, such as the quality of labour relations, the risk of technological change or international political climate. Both, quantitative and qualitative factors are important factors of evaluation of alternatives and the manager to measure decisions on the basis of the weight of the total evidence.

4. Comparison alternatives: The evaluation of various alternatives presents a clear picture as to how each one of them contribute to organizational objectives. A comparative study of all such alternatives is made to find out which is the most satisfactory one.

5. Selection of alternatives: When selecting from alternatives three basic approaches are to use: experience, experimentation and research and analysis.

Experience: Reliance on past experience probably plays a larger part than it deserves in decision-making. Experienced managers believe that the things they have successfully accomplished and the mistakes they have made furnish almost infallible guides to the future. Experience is the best teacher. The process of thinking problems through making decisions, and seeing programmes succeed or fail does not make for a degree of good judgment. Guiding by past experience may be danger in the first place for their mistakes or failures. Secondly, the lessons of experience may be entirely inapplicable to new problems.
On the other hand, if a person carefully analyzes experience, rather than blindly following it and if he/she distills from experience the fundamental reasons for success or failure, then experience can be useful as a basis for decision analysis.

Experimentation: An obvious way to decide among alternatives is to try one of them and see what happens. Experimental technique is most expensive one. Experimentation can be used only after considering other alternatives.

Research and Analysis: One of the most effective techniques for selecting from alternatives when major decisions are involved is research and analysis. This states solving a problem by first comprehending it. Solving a problem requires breaking it into its component parts and studying the various quantitative and qualitative factors. Study and analysis are far cheaper than experimentation. A major step in research and analysis approach is to develop a model simulating the problem. The most comprehensive research and analysis approaches to decision making is operations research.

6. Putting Decisions into Action: This requires the communication of decision to subordinates, getting acceptance of the decision, and getting their support and cooperation for converting the decision into effective action. The decision should be effected at proper time and in proper way to make the action effective.

Effective Decision Making: The decision making process goes through the various stages and the basic objectives of all these stages are to solve a problem through the decisions. The solution of the problem depends on how effectively the decisions are taken and implemented. The effectiveness of decisions can be measured in terms of their action-orientation, goal directed behaviour and efficiency of decision­making:
Decisions are action oriented, that is directed towards relevant and controllable aspects of the environment. Decision may be interpreted as the intervening variables which may ultimately lead to the end-result variables. For this reason, decision should ultimately find their utility in implementation. The decision makers in the organization have an impact on organizational goals (end) through these decisions.
The value of a decision and the associated action is related to the dispatch with which the goal is achieved. While the value of a decision is dependent upon the attainment of a given goal or set of goals, such accomplishment is a function of enthusiasm and skill with which the proposal is pursued. A decision maker can go for an efficient decision when he feels a real choice opportunity exists.

Rationality in Decision

It is frequently said that effective decision-making must be rational. But what is rationality? When is a person thinking or decide rationally?
People deciding rationally are attempting to reach some goal that can’t be attained without action. They must have a clear understanding of alternative courses by which a goal can be reached under existing circumstances and limitations. They also must have the information and the ability to analyze and evaluate alternatives in the light of goal sought. Finally they must have a desire to come to the best solution by selecting the alternative that most effectively satisfies goal achievement.
People seldom achieve complete rationalism. No one can make decisions affecting the past, decisions must operate for the future and the future invariably involves uncertainties. Secondly, it is difficult to recognize all the alternatives that might be followed to reach a goal; this is true when a decision, involves opportunities to do something. That has not been done before.
Rationality may be defined as the capacity for objective and intelligent action. It is usually characterized by the patent behavioural nexus between ends and means. If appropriate means are chosen to reach desired ends, the decision is rational. But it is very much difficult to separate means from ends - an apparent end may only be a means for some future end. Simon has presented three specific problems in using means-ends chains as the test of rationality.

(i) The ends to be attained by the choice of a particular behaviour, alternative are often completely or incorrectly stated through failure to consider the alternative ends that could be reached by selection of another behaviour.

(ii) In actual situations a complete separation of means from ends in impossible.

(iii) The means-ends terminology tends to obscure the role of the time element in decision-making. Simon points out that “a decision may be called objectively rational if in fact it is the correct behaviour for maximizing given values in a given situation. It is subjectively rational if it maximizes attainment relative to the actual knowledge of the subject. It is consciously rational to the. degree that the adjustment of means to ends is a conscious process. It is deliberately rational to the degree that the adjustment of the means to ends has been deliberately brought about. A decision is organizationally rational if it is oriented to the organizations goals; it is personally rational it is oriented to the individual’s goals.”

Economic Man and Administrative Man: Economic Man

The concept of economic man was evolved by classical economic theorists. The economic man is as completely rational in every way. Regarding his decision­making activities, following conditions are assumed:

1. The decision will be completely rational in means and ends sense.

2. There is a complete and consistent system of preferences, which allows a choice among alternatives.

3. There is a complete awareness of all possible alternatives.

4. There are no limits of computations that can be performed to determine the best alternative.

5. Probability of calculations are neither frightening nor mysterious.

Administrative Man

Simon has presented the idea of administrative man who is a descriptive model of decision-making behaviour. Simon presents a more realistic sequel to the classical economic man. He summarized administrative man’s behaviour as follows:

1. In choosing between alternatives he attempt to satisfy or look for the one, which is satisfied, or good enough.

2. He recognizes that the world he perceives is a drastically simplified model of the real world. His content with this simplification because he believes the world is mostly empty.

3. Because he satisfies, rather than maximises he can make his choice without first determining all possible alternatives and without ascertaining that these are in fact all the alternatives.

4. Because he treats the world as rather empty, he is able to make decisions with relatively simple rules of thumb or tricks of the trade, or from force of habit. These techniques do not make impossible demands upon his capacity for thought.

This administrative man tries to be rational and satisfying, rather than maximizing. Administrative man does not work on the basis of perfect knowledge, which is mostly a real situation. The difference between economic and administrative man is one of relative degree because under some conditions, satisfying approaches may be maximizing, are very far apart. Administrative man model represents to, real situation of decision-making behaviour. Economic man represents a very hypothetication position to assist the analysis. Administrative man model hold good for managerial decision-making behaviour.

Types of Decisions

1. Programmed Decisions These are standard decisions which always follow the same routine. As such, they can be written down into a series of fixed steps which anyone can follow. They could even be written as computer program

2. Non-Programmed Decisions. These are non-standard and non-routine. Each decision is not quite the same as any previous decision.

3. Strategic Decisions. These affect the long-term direction of the business eg. whether to take over Company A or Company B

4. Tactical Decisions. These are medium-term decisions about how to implement strategy eg. what kind of marketing to have, or how many extra staff to recruit

5. Operational Decisions. These are short-term decisions (also called administrative decisions about how to implement the tactics eg which firm to use to make deliveries.

Figure 1: Levels of Decision-Making

The model in Figure 2 above is a normative model, because it illustrates how a good decision ought to be made. Business Studies also uses positive models which simply aim to illustrate how decisions are, in fact, made in businesses without commenting or whether they are good or bad.

Linear programming models help to explore maximizing or minimizing constraint: e.g. one can program a computer with information that establishes parameters for minimizing costs subject to certain situations and information about those situations.

Spread-sheets are widely used for ‘what if simulations. A very large spreadsheet can be used to hold all the known information about, say, pricing and the effects of pricing on profits. The different pricing assumptions can be fed into the spreadsheet ‘modeling’ different pricing strategies. This is a lot quicker and an awful lot cheaper than actually changing prices to see what happens’ On the other hand, a spread-sheet only as good as the information put into it and no spread-sheet can fully reflect the real world. But it is very useful management information to know what might happen to profits ‘what if a skimming strategy, or a penetration strategy were used for pricing.

The computer does not take decisions; managers do. But it helps managers to have quick and reliable quantitative information about the business as it is and the business as it might be in different sets of circumstances. There is, however, a lot of research into ‘expert systems’ which aim to replicate the way real people (doctors, lawyers, managers, and the like) take decisions. The aim is that computers can, one day, take decisions, or at least programmed decisions (see above). For example, an expedition could carry an expert medical system on a lap-top to deal with any medical emergencies even though the nearest doctor is thousands of miles away. Already it is possible, in the US, to put a credit card into a ‘hole-in-the-wall’ machine and get basic legal advice about basic and standard legal problems.

Constraints on Decision-Making

Internal Constraints
These are constraints that come from within the business itself.

Availability of finance: Certain decisions will be rejected because they cost too much
Existing Business Policy: It is not always practical to re-write business policy to accommodate one decision
People’s abilities and feelings: A decision cannot be taken if it assumes higher skills than employees actually have, or if the decision is so unpopular no-one will work properly on it.

External Constraints
These come from the business environment outside the business.

1. National & International legislation

2. Competitors’ behaviour, and their likely response to decisions your business makes

3. Lack of technology

4. Economic climate

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