(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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