1. 1The Decision maker at senior management is a fundamental part of the past, present and future success of an organization. To maximise their potential and ensure the company can not only keep up with the dynamic Business world but also develop its success, Senior Managers must gather all information possible, use all resources and tools available and execute major strategic decisions with preciseness and confidence of knowledge.
1. 2Bounded Rationality causes many problems in the decision making process such as ignorance of certain vital facts, lack of clarity on issues and missed opportunities in fields such as innovation and growth. . 3Cognitive simplification also holds back decision makers from excelling in difficult situations due to past experiences and information obtained in the past, causing them to shut out promising situations for future prosperity in decision making. 1. 4 Systems implementation can be a difficult process, but, with the right attitude, good communication skills and the involvement of all levels of staff, will, prove to be unproblematic and enable users to adapt to the change of systems quickly.
It will also enhance staff morale and productivity with their involvement. 2. Introduction The nature of decision making at senior level management can be vital to an organisations success and despite the effects of old fashioned ways of thinking and resolution, modern day systems when implemented properly can play a very positive role in the future success of an organization. 3. The Nature of Decision Making at Senior Level Management 3. 1The Changing Nature of Decision Making
The IT developments of the nineties brought with them many new decisions and difficulties for senior management, some of which were quite new. This knowledge gap led to many unanticipated consequences of change, and these could easily become risks. Ulrich Beck (1992), the German sociologist, told us that we were now living in a risk society. A group particularly affected by risk was, of course, senior management itself, who had to protect the firm from the results of what were often earlier errors of judgments.
In order to avoid this, Senior Managers had to adopt to the new style of decision making by embracing the impact of significant information systems developed over the years and using them effectively as a source of information to aid the Senior decision makers to make the best strategic choices in order to keep the organization running efficiently. These information systems now provide detailed analysis on current capacity, current unit cost, sales analysis, skills available to the organisation etc.
Which allows Senior Management to dissect the business in its present state and allows them the opportunity to develop a roadmap for the future. Business books are rich with insights about the decision process, but Senior Managers have been slow to adopt their recommendations. Therefore, to succeed in business today, your company needs information systems that can support the diverse information and decision-making needs of you and your company and support you in making snap but informed decisions.
It’s time to focus on decision making, Davenport says, and he proposes four steps for managers to adhere to in the decision making process: (1) List and prioritize the decisions that must be made; (2) assess the factors that go into each, such as who plays what role, how often the decision must be made, and what information is available to support it; (3) design the roles, processes, systems, and behaviours your organization needs; and (4) institutionalize decision tools and assistance.
This, together with the information available to managers helps form a more systematic approach to decision making. 3. 2 The Role of the Senior Manager The overriding rule in decision making is that the decision maker ought to have legitimacy and authority over the people who he or she is deciding upon, this is where the senior management level put to practice all the information assembled together with their policies and procedures. In other words, decision makers succeed only when their decisions are honoured and implemented by the people or groups that the decision impacts.
It is Senior Managers who take the important company decisions on what to do, how to do it, and what they intend the consequences of their decisions to be. Their role is critical to successful change. It is their definition of business objectives that will shape the change programme, and it is they who will have the final say in how to manage this so they need full support and commitment from fellow colleagues in order to carry out the proper procedure to achieve the end goal. Indeed, making good decisions and making them happen quickly are the hallmarks of high-performing Senior Managers .
In the Harvard Business Review recently when they surveyed executives at 350 global companies about their organizational effectiveness, only 15% said that they have an organization that helps the business outperform competitors. What sets those top performers apart are the quality, speed, and execution of their decision making. The most effective organizations score well on the major strategic decisions—which markets to enter or exit, which businesses to buy or sell, where to allocate capital and talent.
But they truly shine when it comes to the critical operating decisions requiring consistency and speed—how to drive product innovation, the best way to position brands, how to manage channel partners. Therefore, should Senior Managers avoid letting technological jargon distract from the function of a system and focus their tools available and knowledge acquired together with their personal style of decision making there should be no reason why they cannot become leaders in their industry in strategic decision making. 4. Effects of Bounded Rationality
The bounded rationality model assumes that managers satisfice by selecting the first alternative that is good enough. The pressures of time and competition in today’s global environment require that managers make decisions quickly. Bounded rationality recognizes that it is impossible to comprehend and analyse all of the potentially relevant information in making choices. The only possible way of coping with the complexity of the world is to develop techniques, habits and standard operating procedures to facilitate decision making.
The point of bounded rationality is not that people might decide differently if they had more or different information, or differently with different items in the utility function. Rather it is that they can’t process all the information even if they had it. Thus if we are to predict people’s actions, it will not be enough to know the amount or quality of available information. Rather we must know the cognitive process of selecting among information or choosing rules of thumb or slogans. This results in missed opportunities for companies in many sectors such as finance, advertising, public relations and product innovation.
Bounded Rationality also plays a central role in explanations of why organizations are structurally biased in their evaluations of simultaneous decision alternatives (Ocasio, 1997), why they make frequent and predictable errors when attempting to choose the optimal alternative (Finkelstein et al. , 2009), and why they use simplifying rules or heuristics to reduce the cognitive demands of decision making(Gavetti et al. , 2005). This holds organizations back when it comes to forward thinking and new approaches for the company.
Companies are often slow to recognize important developments at the periphery of the business that turn out to be strategically important. Examples include the music industry’s failure to foresee the threat of Napster-type services, Polaroid’s bankruptcy resulting from the rapid rise of digital photography, and Wal-Mart’s surprise at social concerns leading to community resistance to new stores. In business, changes that occur slowly are often not recognized until it is too late. This may explain, in part, business scandals. At Enron, for example, accounting irregularities were adopted slowly. . Cognitive Simplification Research in cognitive psychology, behavioural decision theory, and strategic decision making has identified several cognitive simplification processes or heuristics which decision makers use when they deal with complex, ambiguous, and uncertain decision situations.
These processes include availability, adjustment and anchoring, prior hypothesis, and reasoning by analogy. Although they are useful in some circumstances, they are also the causes for several types of judgment errors and biases among senior management’s strategic decisions. . 1 Availability People tend to assign more importance to recent events or knowledge because they are easy to recall and imagine from memory. Executives rely heavily on their past experiences and knowledge to make decisions. Their limited ability to retrieve past cases may cause them to make biased judgments and decisions. In this instance it is crucial for decision makers to have unlimited sources of information, but, the effect of not having so results in the wrong decisions. 5. 2 Adjustment and anchoring
In strategic decision making, executives often make initial judgments about certain decision variables and adjust the initial judgments when new data become available. However, the adjustments are typically insufficient. The final judgment is biased toward the initial estimate. When executives plan for the uncertain future, they anchor on past experience. Past experience may be misleading and inappropriate for prediction of the future, especially when there is a major discontinuity in social trends or technological breakthroughs. 5. 3 Prior hypothesis bias
Individuals tend to seek and use information consistent with their beliefs rather than information that is inconsistent. Jervis made the following observation: We ignore information that does not fit, twist it so that it confirms, or at least does not contradict, our beliefs, and deny its validity. Confirming evidence, by contrast, is quickly and accurately noted. This bias explains why sometimes individuals or Senior Managers make bad decisions based on erroneous assumptions even though numerous evidences show that the assumptions were wrong.
An effective cognitive decision support system should do more than passively present information to executives. It should actively engage in the executive’s thinking process and provide both flexibility and guidance in decision support. 5. 4 Reasoning by analogy Decision makers often reason by analogy. When making judgments and decisions under uncertainty, decision makers often compare new problems with past cases or experiences from which useful information, strategies, and courses of action can be derived. This process can greatly benefit effective decision making.
Reasoning by analogy has also been shown to be effective in generating creative solutions to problems. However, reasoning by analogy is also problematic. For example, human beings have difficulty retrieving past experiences. The associations between existing circumstances and past events can be inappropriate and misleading at times. In strategic decision making, reasoning by analogy typically involves the application of analogies from simpler situations to complex strategic problems, which helps reduce the uncertainty perceived in the environment.
However, the use of simple analogies may mislead the decision maker into an overly simplistic view of the situation which results in decisions on policies and procedures not being accurate enough to deal with sufficient problems that may arise. 5. 5 Overconfidence Researchers have shown that people have a tendency to be overconfident in their beliefs and judgments . Overconfidence can be dangerous. It indicates that people often do not know how little they know and how much additional information they need. Many business blind spots can be attributed to the overconfidence of top management.
For example, IBM was too confident about its dominant ability in the computer industry to pay attention to changing customer demands. The causes of overconfidence seem closely related to availability, adjustment and anchoring, and prior hypothesis biases discussed already. Decision makers tend to rely on recent information or information that is easy to recall from memory when making decision. When information is abundant, decision makers tend to anchor on prior hypothesis or beliefs and seek confirming information (prior hypotheses bias).
These biases are likely to cause decision makers to ignore important information and become overconfident about their judgments. Furthermore, decision makers have difficulty in imagining all of the possible ways that events can unfold. Because they fail to envision important pathways in the complex net of future events, they become unduly confident about predictions based on the few pathways they actually do consider leading to a very tunnel vision approach to decision making which cannot be sustained in the very dynamic business world we have. . Implications for those Implementing Decision Support Systems Planning for any new IT system includes a number of key steps, such as identifying the needs and functional requirements (defining the existing business processes), deciding whether to purchase a commercial system or build the system, designing or configuring the system for use in the local environment, planning the implementation process, and determining how to evaluate how well the system has addressed the identified needs.
Computer-based decision support is more effective than manual processes for decision support, interventions that are presented automatically and fit into the workflow of the clinicians are more likely to be used, Systems that recommends actions for the user to take are more effective than CDS that simply provides assessments and interventions that provide information at the time and place of decisions made are more likely to have an impact.
The area of user involvement in DSS project implementation is extremely problematic and complex. It is a process that involves all the individuals who make-up the organisation, from senior level executives to operational staff. DSS that are successfully implemented have revolutionised the day-to-day and strategic operations and thorough communications between the systems implementer, senior management and staff the process of implementation can run smoothly.
Users of the certain systems will be fortunate enough in that the system might be created to suit their specified requirements. On the other hand, some users will not be committed to the pre-packaged system, as it did not directly benefit the users in making noticeable changes to their working practices.
A sound understanding of the factors of DSS project implementation success requires a consideration of all activities involved as the system is expected to benefit user activities at operational and strategic level of the organisation. Still, those who had already adopted the technology will experience varying degrees of success in implementing the system. Finally, considerable opportunity exists for others to expand on and otherwise improve these initial efforts in understanding the phenomenon of DSS project implementation.
