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Decision Making Process

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The purpose of this paper is to analyze the decision -making process that was involved in appointment of company president, in the company where I personally worked. Mr.Zutshi, the company president faced a very critical decision making situation while appointing new successor for the company, after his retirement. A Chief executive officer’s decision has considerable impact on the performance of the organization. Decision-making is one of the most important recurring responsibilities facing managers in organizations. A high-quality decision helps an organization accomplish its strategic goals and also meets the needs of the organization’s employees, executives, stockholders, consumers, or suppliers.

In his book called “Decision Making,” Paul Moody (1983) defines decision ” as an action that must be taken when there is no more time for gathering facts.” The Problem is how to decide when to stop gathering facts. The solution varies with each problem we attempt to solve, for gathering facts costs time and money.

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Peter E. Druker (1967), lists five elements of decision process in his book, The effective Executive:1) Clear realization that the problem is generic and can be solved only through a decision that establishes a rule, 2) Definition of the specifications of the solution, or the boundary conditions, 3) Derivation of a solution that is ” right,” that is, one that fully satisfies the specifications before attention is given to the concessions needed to make the decision acceptable, 4) The building into the decision of the action to carry it out, 5) The feedback that tests the validity and effectiveness of the decision against the actual course of events.

Druker goes on to explain that a decision is a judgment and, as such, is rarely a choice between right and wrong. At best it is a choice between ” almost right” and ” almost wrong.”

Paul Moody (1983), has written in his book, Decision Making, that, “if a company has a long-standing policy of acting in a certain situation in a particular way, then it is easy to make a decision that is consistent with past history. However, if an organization is very volatile and a historical pattern has not been established –or if the nature of the decision is such that actions are highly dependent on the factors known to only higher-level personnel in the organization–then the decision assumes major importance. He further adds that, where the human impact of a decision is great, its importance is great. This is particularly true when the decision involves many people.

Paul C. Nutt (1989), states in his book, Making Tough Decisions, that, ” the best that a decision maker can do is follow steps that’s increase the prospects of understanding foreseeable risks and prepare for possible outcomes. Most decisions have uncertainty, ambiguity, and conflict. Uncertainty and ambiguity arises when key elements in a decision cannot be characterized. Conflict can stem from ambiguity, or it can result from the disagreements among key parties with stakes in the decision (Freeman, 1983).

In the book called Decision making at the Top, Gordon Donaldson & Jay W. Lorsch (1983) state that, strategic decisions are not the product of simple economic logic alone. Because these decisions often depend on forecasts of the future events, they involve considerable uncertainty and ambiguity. Corporate leaders’ desire to assure the survival of their company provides the driving force for their initiatives and strategic choices. James G. March (1994) has written in his book, A Primer on Decision making, that, Organizational decision making is a combination of talk and action. The making of concrete decisions in an organization is an exercise of practical, contextual judgment. Decision making normally presumes commitment, the willingness of decision-makers both to devote time and energy to deciding and to accept responsibility for the uncertain consequences of their actions.

Case: At 60, Mr. H L Zutshi, the company president, decided he would retire before the mandatory retirement age of 65. He did not reveal his decision to anyone until he reached 62, and at this time he confided to his best friend and the most powerful board member that he would retire imminently. Mr. Zutshi proposed that Mr.S K Kherr, Vice President, Administration, a very able and experienced executive, succeed him as president. Mr. Zutshi’s friend vehemently opposed Kherr’s candidacy, and forcefully argued that S N Mathur, vice president of manufacturing, was the best qualified to be the new president. This case presents a situation where the decision-making process has completely failed.

Analysis: The selection of the president is one of the most important decisions a board of directors makes. Not only does a president have an enormous impact on the fortunes of a company, but the very process by which the executive is picked influences the way employees, investors, and other constituencies view the company and its leadership. In short this decision will effect the whole organization.

Considering that Mr. Zutshi was approaching the mandatory retirement age, and that a significant difference in opinion between Mr. Zutshi and the most powerful board member as to who should be the new president, it is clear that the board (the president is almost always a board member) was extremely derelict in its duties. The decision-making process was greatly undermined, with huge ramifications for the organization.

In the Indian way of decision-making, the single most important element in solving such problems is defining the question. Because the Indian system is very time consuming and involves many participants (higher level managers) from various functions within the organization, the Indian system is suited to big decisions. A change is president is one of the most crucial events in the life of a company, and it is an event in which the board of directors plays a central decision – making role. Because the new president must be chosen soon, it was already too late to make an effective decision. The decision process will inevitably be marred by politics and compromises, resulting in a weaker organization and lower morale.

A successful succession process requires that the board members first define the question: Always view the problem from different perspectives. Each board member should have an independent point of view. Board members should be open-minded. Every board member should seek information and opinions from a variety of people to widen his/her frame of reference. Board members need to be active players in shaping the company, and one of their key responsibilities is to oversee the entire succession process.

The Company has an effective management development program for the entire organization. It is comprehensive and its part of basic personnel program for the whole company. It is well understood by everyone throughout the organization. It tracks managers’ assignments, identify their development needs, and establish the career paths that will prepare them for higher responsibility. The board draws on information from the management development program to evaluate each manager in relation to the qualities that everyone has agreed are important for the president. As Paul Moody (1983) mentions in his book, Decision- Making, that, “given that a number of methods can be used to arrive at a decision, how can we determine which one to use at a particular time? Obviously, this problem relates to the importance of the decision. Hence a decision related either to the selection of an individual for a major management position or to a significant capital expenditure would require significant prior research.”

It is important that the board make sure that the succession process begins about four or five years before the president is expected to step down. This time frame gives room for maneuver if necessary, and that is important. The board has to identify candidates who could be moved to the top of the organization. If there is only one real candidate to succeed the president, the president needs to go out and bring new people into the top ranks of the company – to get the pool of successors up to three or four strong candidates. Getting these new people established and reviewing their performance takes time, so the board needs to insist that the process start early. This requires great communication between board members, which does not seems to exist in this case. Often times the effective decision-making process in undermined because the board is passive, and board members are friends with the president. Mr.Zutshi, did not reveal his decision until he was 62, leaving almost no time for the board to select new successor.

There are many pitfalls in making an effective decision if the question is not examined from all perspectives. Certainly Mr. Zutshi and his friend on the board had strong opinions as to who should be the next president, and a strong difference in opinions is not unusual, and in some cases, it can be healthy. It is very possible that both Mr. Zutshi and the board member got caught in the confirming evidence trap because it is so insidious. As Paul C. Nutt, (1989) notes in his book, Making Tough Decisions, that, barriers to improving decision making stems from clashes in interest, which can produce divisiveness and conflict. Decision-makers caught in such a trap find it impossible to systematically seek out and consider information that reveals what decision is about, let alone mingle chance information about future conditions with objective information to carefully compare alternative courses of action.

It is critical to the whole organization that the president makes sure it is the smart choice. So Mr.Zutshi should put his decision to the test:

* He should check to see whether he is examining all the evidence with equal rigor and should avoid the tendency to accept confirming evidence with equal rigor and without question.

* Get someone he respect to play devil’s advocate, to argue against the decision he is contemplating. Better yet, build the counter argument himself.

* Consider the decision with an open mind. Is he really gathering information to help him make a smart decision, or is he just looking for evidence confirming what he think he would like to do?

A first step in making a decision is to frame the question. It is also one of the most dangerous steps. A poorly framed problem can undermine even the best-considered decision. When others recommend decisions, examine the way they framed the problem. Challenge them with different frames. The process should include all parties that are affected by the decision. When a consensus is reached, the decision can be easily implemented because people implementing the decision were intimately involved in the decision-making process.

The disagreement between Mr. Zutshi and the board member regarding who should succeed Mr. Zutshi has sabotaged the effective decision-making process. It is highly unlikely that the next president will be the “best” candidate, and politics will compromise the integrity of the decision process. Naturally, there are enormous implications for the economic health of the organization.

In conclusion there are a multitude of factors affecting the quality of decisions made by any given manager that include but are not limited to: personality characteristics, experience, the context of the situation at hand, strategies used and critical thinking and analysis. It is only a logical conclusion that the manager will implement decisions with an enthusiasm and dedication that is equivalent to their belief they have selected the correct action for the situation. If Mr.Zutshi follows some of the simple steps outlined and avoids the pitfalls, he can and should have complete confidence in the decision made.

Making decisions is a major portion of the manager’s responsibilities. It is an aspect that cannot be taken lightly nor can it be done in a hasty manner. Decisions that are made with deliberation using different kinds of processes, however, can lead the department or company to better and/or more profitable operations. When decisions are indeed made in this manner, the manager should feel confident that he or she has made an appropriate decision and is the best option given the information available at the time. This does not mean to say that the manager will always make the correct decision; lack of information or situational changes can lead to faulty analysis. However, if the manager uses critical thinking and proven successful decision-making strategies, he or she can and should be confident in whatever action they have decided is appropriate.

Reference

Drucker, P.(1967). The Effective Executive. New York: Harper & Row Publishers.

Moody, P. (1983). Decision Making. New York: McGraw-Hill Book Company.

Nutt, P.C. (1989). Making Tough Decisions. San Francisco, California: Jossey-Bass, Inc., Publishers.

Donaldson, G. & Lorsch, J.W. (1983). Decision Making At The Top. New York: Basic Books, Inc., Publishers.

March, J.G. (1994). A Primer On Decision Making. New York: The Free Press.

Cite this Decision Making Process

Decision Making Process. (2018, Jul 04). Retrieved from https://graduateway.com/decision-making-process/

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