Navigating Uncertainty: The Role of Decision Making in Organizational Management

Decisions are an essential part of organisations. Decision making is the process based on choosing alternative which are based on the values, beliefs and preferences. It is constant and essential element of handling any company actions (Gallivan, et. al., 2018). Decision making is one of the important functions of management. Without other managerial functions such as planning, organising, controlling, directing and staffing cannot be conducted because in this managerial functions decision is necessary. Herein, the managers and leaders have to take a sound-full decision for their organisation. The decision-making theory is based on three different states of the decision-making environment: certainty, risk and uncertainty (Wei, 2017). Certainty can be classified as a condition in which the managers exert their entire and perfect knowledge in the context of the influence of all the available substitute. Presently, the study focuses on ‘risk’ and ‘uncertainty’ synonymously. Both factors imply a lack of certainty.

However, there is a difference between the two components. Risk can be distinguished as a condition in which the decision-makers has only imperfect information and incomplete details, but then too, they are able to allocate foreseeable estimate to the probable outcomes of the decisions. These estimates may be biased judgments, or they may be derived from the calculation from a probability distribution. Moreover, uncertainty is considered as a condition where the managers do not have even the complete details to make subjective decisions. According to the Kvam (2019), the risk is considered as an objective, but on the other hand, uncertainty is subjective. Risk can be measure or compute, but uncertainty cannot be quantified. Herein, managers of the organisation have to follow some modern techniques to improve the quality of decision making under the conditions of uncertainty. The most essential among these are:

Risk analysis: Manager who follows this technique can able to examine the volume and nature of the risk includes in opting a particular alternative.

Decision tree: These are considering as the best way to analyse a decision. It is because it involves the graphic representation of an alternative course of action.

Preference theory: This technique directly linked with individuals’ attitudes towards the risk varies.

At a strategic level of decision making, managers were meeting with the issues that are largely unstructured and require a great deal of judgment. Often decisions are made under the condition of risk and uncertainty and subject to varying degrees of decision bias (Parayitam, and Papenhausen, 2018). Some of the most commonly considered cognitive biases are confirmation, anchoring, overconfidence and halo effect. The confirmation bias happens when the information available is used in verifying the already existing beliefs. While on the other hand, anchoring bias happens when the individual is more reliant on a singular piece of information instead of past experiences to make appropriate judgements (Millner et al., 2019). In contrast, the Halo effect is described as the impression of the observer for an individual or a company. It also takes into consideration feelings of the observer, their thoughts and other such aspects of the individual or the firm. Overconfidence bias occurs when decision-makers overvalue the dependability of their decision. This bias can comprise the assurance one believes in their own aptitude, performance, level of power, change of accomplishment. Sometimes time pressure is also a factor of bias in decision making. Time pressure can diminish the value of decision making and individual judgment. Time pressure may also have the contradictory result on the organisational motivation to provide decision and move on (Kvam, 2019).

Moreover, interpersonal and group dynamics can create problems and sometimes it turns to the ineffective decisions for the company. Along with, the behaviour of leaders also affects the efficiency of decision making. Group cohesion or positive feelings among the team members and enhanced working relationships leads the valuable group decision. Along with this factor also eliminate decision bias. At the time of uncertainty and risk, managers have to make a structured and effective decision for their company. For reducing the decision, bias managers have to involve the opinion and ideas of their co-members. The representative bias is the decision-makers wrongly compares two situations, but they do not compare it to other similar situations, meaning that they have very little information to act on (Dror, 2017). The availability bias states that the decisions makers use only that information which is available to them. In such situations, they do not try to find a new information and make decisions based on the information which is easily accessible. This bias can be dangerous, especially when making decisions in an uncertain situation.

References:

Barraquier, A., (2011). Ethical behavior in practice: Decision Outcomes and Strategic Implications. British Journal of Management. 22. p.S28.

Dror, I. E. (2017). Human expert performance in forensic decision making: seven different sources of bias. Australian Journal of Forensic Sciences, 49(5), 541-547.

Favoreu, C. et. al., (2016). Strategic management in the public sector: a rational, political or collaborative approach? International Review of Administration Sciences. 82(3).pp. 435-453.

Kvam, P. D. (2019). Modeling accuracy, response time, and bias in continuous orientation judgments. Journal of experimental psychology: human perception and performance, 45(3), 301.

Millner, A. J., et. al., (2019). Suicidal thoughts and behaviors are associated with an increased decision-making bias for active responses to escape aversive states. Journal of abnormal psychology, 128(2), 106.

Parayitam, S., and Papenhausen, C. (2018). Strategic decision-making. Management Research Review.

Sibony, O. et. al., (2017). Behavioural Strategy and the Strategic Decision Architecture of the Firm. California Management Review. 59(3).pp. 5-21.

Wei, G. (2017). Some cosine similarity measures for picture fuzzy sets and their applications to strategic decision making. Informatica, 28(3), 547-564.

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