Introduction
Decision making in organisations is
among the most important function of any manager. Decisions range from simple
procedural decisions to complex strategic and operational decisions. Care must
be taken to ensure that the decisions made address the problems identified and
that they enhance the overall performance of the organisation (Russell, 2006).
In management, the suitability of decisions determines the extent to which an
organisation can be considered to be effective (Hill, 2000). This calls for an
analytical approach that enables the managers to think through the options
available carefully before making a decision on which direction is to be taken.
A typical decision
making process in organisations comprises of 8 sequential steps which start
with the monitoring process. The second stage involves the identification of
the problem and is followed by the setting of objectives (Barnes, 2008). After
this, efforts are made to better understand the problems and this stage is
followed by the generation of options for dealing with the situation. Subsequent stages involve the evaluation of
options generated and the selection of the most appropriate option. Various
models have been developed in an effort to facilitate a structured approach to
decision making with most models requiring some level of analytical competence
of the manager (Barnes, 2008). Decision models help in coming up with
simulations that help the manager to be better prepared for various situations
that may arise from time to time. The models also help in evaluating the full
implications of the decisions to be made and this aspect helps in ensuring that
the best decisions are made at a time (Krajewski, 2005). Some of the most
commonly used frameworks include the decision tree and project planning models.
This paper focuses on the frameworks for structuring manager decisions and
thereby highlights the importance of the application of analysis in decision
making in organisations.
Frameworks for structuring
decisions
The decision tree and the project
planning approaches are among the most common frameworks considered in
structuring management decisions.
The decision tree
provides an avenue through which managers can lay out the options available and
predict the outcome of such options (Yan, 2002). In other words, they help in
coming up with simulations which capture the risks and rewards involved in any
of the options under consideration. For instance, an organisation wishing to
achieve growth in its market share in the organisation would be faced with
certain options which may vary from new product development to market
consolidation strategies (Yan, 2002). In order to determine which options would
be most suitable for the business, the manager would need to come up with a
decision tree which outlines the outcome of each of the options. The decision
tree would outline the outcomes in three categories: good, moderate and bad
with the third category often signifying the risk involved should such a
decision be made. This balanced A typical decision tree appears as shown in the
figure below:
Source: Hill, 2000
In the estimation of
the values of the options involved in a decision tree, probabilities of
occurrence are used with the weighted totals taken as the value of the options
in question (Nayab, 2011). This framework requires that the manager be aware of
all options available and this ensures that the best option under the
circumstances is arrived upon.
The project planning
approach presumes that the activities to be undertaken are project. A project
is a series of tasks that are aimed at achieving a given goal (Turban, 2004). A
project may be one-off or continuous. Project planning highlights on the
activities that are involved in a given project with an aim of managing the
resources involved. The main resources that would normally be focused on
include time, investment required and human resources. Quality and safety
issues are also considered (Turban, 2004). Project planning divides the
projects into stages with an emphasis on time and resources to be used at each
stage.
Activities are outlined
and the amount of time and resources required for each outlined. Determination
is then made to identify the core activities and the sequence that must be
followed in order for the project to be a success (Carmimichael, 2006). For
instance, in a marketing implementation program, market research,
identification of marketing goals, formulation of marketing strategies, and
advertisements, public relations, sales promotion, brand awareness campaigns
and direct marketing may be the main activities. Market research, outlining of
objectives, and formulation of marketing strategies may be the three activities
that must be conducted in succession to each other. The other activities could
be implemented in conjunction with each other as management would see fit. This
brings to the fore the question of determination of predecessor activities and
critical activities.
Critical activities are
those whose delay results in the delaying of the entire project (Carmimichael, 2006).
The shortest amount of time is that a project can take is therefore the sum
total of the durations for critical activities (Carmimichael, 2006). Microsoft
project applications help in the planning process and in the designing of a
network diagram. This component of the project planning process helps in
managing time and crashing the project by ensuring that activities that can be
conducted concurrently are executed together. Project planning can be applied
effectively in all spheres of business management with a renewed focus on the
comprehensiveness of the decisions to be made.
Evaluation of decision making
methods
The evaluation of the frameworks
outlined considers the pros and cons of each of the frameworks highlighted. The
aim of this evaluation is to determine how the methods outlined can be used in
synergy with other methods with a view to ensure synergy and effectiveness is
achieved.
The decision tree model
is hailed as very suitable in highlighting decision options that are available
to the manager (Mind tools, 2012). It allows the manager to focus on the
available options for achieving the objectives set. It therefore ensures high
levels of comprehensiveness. Decision trees allow for the focus on the entire
process and implications of a decision. This means that the manager has to have
the holistic picture at the planning stages and this implies adequate focus on
the intended results. Through the provision of options of favourable and
unfavourable outcomes of each option, the manager is able to accurately
determine what options are best in the given circumstances (Hansen and McKell,
2002). Decision trees are also easy to understand. They are simple models whose
construction and interpretation is easily understood. The decision tree also
allows ease of reference. Unlike many other decision models where extensive
scrutiny may be needed, the decision tree allows for the evaluation of all
possible options in a single view. The decision tree is also hailed as specific
in terms of presenting values to the given options (Martin, 2009). Values are
absolute and are not left to interpretation by viewers. By assigning
probabilities and specific values, the decision trees leave little room for
misunderstanding or poor decisions.
On the other hand, decision
trees suffer certain disadvantages. To start with, they tend to be inadequate
where complex decisions are to be made. A typical complex decision would
require that considerations be made of numerous activities that may be
interdependent (Hansen and McKell, 2002). It becomes difficult to conduct an
analysis on the decision tree where such complexities are involved. It is
especially difficult to come up with the probability estimates of different
options. It also requires that expertise be factored in when coming up with the
probabilities: managers tend to require extensive training in order to acquire
it (Bettley, Mayle and Tantoush, 2005). The decision tree is also said to be
unstable in view of the fact that it is dependent on external factors. Any shifts
in the factors in the external environment impacts the decision tree in a
manner that necessitates a reconstruction of the same. The instability of the
decision tree is also drawn from the fact that it largely depends on
assumptions and expectations. Where such expectations are unrealistic or
flawed, managers could end up making bad decisions (Yan, 2002). In many cases,
the construction of the decision tree requires lengthy consultations with
experts in the different sections of the tree. Different decision options would
require that sufficient input be derived from the parties that are likely to be
affected by such decisions. This consultation process requires that such
parties undergo training on the decision tree and how to ensure that the
information presented is of value (Lester, 2000). It therefore comes at a cost
to the organisation in terms of actual investment and time.
Project planning
emphasizes the approaches common to project management where the focus is on
all activities required to achieve the goals set. The most outstanding feature
of the project planning method is the critical path analysis which is used to
ensure that a project can be completed in the shortest time possible (Lester,
2000). Project planning is known to be useful in highlighting the dependencies
between different activities. This is done by defining the critical activities
and establishing the critical paths. The project management approach is also
useful in organising large and complex projects. Typically, a project would
include numerous activities whose dependency on each other must be established
for project management to be done appropriately (Lester, 2000). The project
planning approach also helps in establishing the float of every activity. Once
the critical path has been established, the manager can determine the extent to
which various activities can be delayed without causing a delay in the overall
project. Project managers use this information in mitigating any foreseeable
risks that would otherwise be able to delay the execution of the whole project
(Sharma, 2011). The project planning approach is also known to focus the
attention of managers towards saving time and reorganising project activities
in a manner that ensures that as little time as possible is spent in delivering
the project. It also enables focus on efficiency of the project. It does this
by highlighting the impact of schedule changes on activities and with the focus
on the critical path expected to highlight the limitations the manager has in
managing the project (Sharma, 2011).
Project planning often
requires specialised knowledge of applications such as Microsoft project,
Microsoft Office and others. Managers must therefore be well trained in order
to use the decision methods effectively. Without such software, it becomes
difficult for managers to focus on all activities and how they interconnect
(Schwenk, 2012). Project planning mainly focuses on relatively complex
activities in organisations. It becomes less effective used on simpler
decisions with its use in procedural issues often tending to be
counterproductive. This decision method is also known to inadequately focus on
resource allocation. It can not stand alone in project management unless used
in conjunction with other models. One other limitation is that this decision
method does not allow for quick comparison between the available options
(Allen, 2011). Moreover, the development of a comprehensive network diagram
tends to be an involving process and where several options have to be considered,
the cost implication is high.
Use of decision structuring
frameworks in organisations
To better understand the application of
the project planning and decision tree models, it is important to understand
the decision management process that is followed in organisations. The first
step in the decision making process is the observation or monitoring of the
situation (Martin, 2009). The observation process helps in the identification
of any flaws that may need to be tackled. In the second stage, problems are
identified. The impact of the problems are evaluated and the rationale for coming
up with a strategy for tackling the problems established. This stage therefore
deals with the need recognition; which in many cases will always be the need to
overcome the challenges faced (Nayab, 2011). In the third stage, objectives are
set. These objectives need to be realistic and focused on solving the problems
identified. They should also be smart (Specific, Measurable, Achievable,
Realistic and Time bound). Smart objectives are useful in ensuring delivery on
the organisational strategies. In the fourth stage, efforts are made to
understand the problem (Barnes, 2008). Research is done to establish how other
competitors have done to deal with similar challenges in a step that is very
useful in guiding the next step. In the fifth step, options on dealing with the
problem are generated. This stage is quickly followed by the evaluation stage
where the options outlined are highlighted. The impact of such options on the
business are evaluated with factors such as ease of implementation scrutinised
accordingly. Once the options have been evaluated, a decision is made on the
options to implement and that marks the beginning of the implementation stage
(Barnes, 2008). In order to ensure that the right decisions are made, it is
important to ensure that decision making process is comprehensive and this
calls for the introduction of scientific and statistical approaches to the
same. Models such as the decision tree and the project planning models should
be put into use.
Given that the
different frameworks for decision making discussed have different strengths and
weaknesses, it is imperative that a creative manager makes use of a combination
of the two to ensure that decision making is both efficient and effective
(Russell, 2006). The decision tree is very good when it comes to capturing the
overview of the project. It ensures that the overall picture is taken into
consideration, problems identified, and options for solving the problems
highlighted as appropriate. A manager wishing to have a clear overall picture
should make use of the decision tree approach. This approach ensures that an
exhaustive approach is taken in evaluating the management options available to
the business manager. Market research is part and parcel of the decision making
process and the decision tree ensures that managers do extensive market
research in order to make predictions that are realistic (Barnes, 2008). The
simplicity of the decision tree ensures that a decision can be made swiftly and
this therefore makes it possible for the business manager to arrive at a
decision on which options to take swiftly (Yan, 2002). It must however be
appreciated that the decision tree lacks in details on how the decisions
highlighted are to be implemented. The decision tree focuses on the overall
picture with its level of complexity largely inadequate in showcasing the
step-by-step processes of implementing the decisions arrive at. Such a focus
would need a more detail oriented model and the project planning model comes in
handy.
The project planning
model can effectively remedy the inadequacies of the decision tree discussed
above. It is more comprehensive and breaks down business decisions into a set
of activities that must be carried out in order to have such a decision
implemented well. The approach on activities helps in creating an in-depth
focus on all procedures involved in each stage of implementation of the
decisions made (Hill, 2000). In other words, a manager gets to understand every
detail of the decision before settling on it. This model is therefore useful
when the options under consideration have been reduced to the bare minimum (two
or three options) in view of the fact that the process would normally be extensive
and very involving. Project planning allows for a comprehensive focus on the
operational aspects of a decision. The implementation can be a simulation of
the relationship between mission, vision and objectives of the organisation
where objectives breakdown the vision into actionable and measurable steps
(Sharma, 2011). The project planning approach makes it possible for managers to
make an in-depth analysis on how a project is supposed to be implemented. The
two approaches therefore operate in a complimentary manner resulting in overall
effectiveness in management decision making. In a typical business management
scenario, the processes are combined in a manner that ensures uniqueness based
on the ability and the preference of the specific manager.
The analytical capacity
of a manager determines to what extent the different models can serve their
decision making purposes (Schwenk, 2012). For instance, the application of the
decision tree requires that the manager be able to estimate the values to be
realised when each of the options under consideration is implemented. The
accuracy of the decision tree depends on the estimates generated on expected
values and probabilities of various occurrences happening. Similarly, the
project planning model is largely dependent on the estimation of duration of
activities and the ease with which the manager can crash activities in order to
ensure that the projects are completed in the shortest time possible.
Conclusion
As has been observed above, analysis and
analytical skills are a crucial part of the decision making process. They help
with the evaluation of different approaches to solving the problems identified.
The decision tree helps in providing a comprehensive overview of the options
needed. It assures accuracy by factoring in the use of specific figures and
probabilities in a manner that sees the better options reflect higher values
than other the less attractive options. The method also provides the business
manager with the option of evaluating the options concerned at a glance. On the
other hand, the decision model focuses less on the operational aspects of the
decisions and fails to consider the detailed operational aspects. This
deficiency can be eliminated by making use of the project planning model. This
model focuses on all activities that are involved in the implementation of the
management decision with a special emphasis on highlighting the duration within
which such activities can be concluded. In a typical business scenario,
managers are advised to make use of several models. Such a hybrid approach
ensures that the decision making process is not left prone to the weaknesses of
the various decision making frameworks. The prerequisite for the application of
such decisions is the possession of analytical skills by managers. The manager
should be able to do accurate estimations as far as probability and estimation
of activity durations is concerned. Where such skills are lacking, the manager
will in many cases be unable generate accurate models and therefore be unable
to make the right decisions.
References
Allen,
C.R., et al., 2011. Adaptive management
for a turbulent future. (Online) Available at:
http://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1079&context=ncfwrustaff
(Accessed 8 April 2012)
Barnes,
D., 2008. Operations management: an
international perspective. Australia: Thomson
Bettley,
A., Mayle, D., Tantoush, T., 2005. Operations
management: a strategic approach. London: SAGE Publications
Carmimichael,
D.G., 2006. Project planning and control.
London: Taylor & Francis
Hansen,
J.V., McKell, L.J., 2002. Decision oriented frameworks for management
information systems design. Information
Processing and Management. 13(4), pp. 215-225
Hill,
T., 2000. Operations management:
strategic context and managerial analysis. 3rd Ed. Hampshire:
Macmillan
Krajewski,
L.J., 2005. Operations management:
processes and value chains. Upper Saddle River: Pearson/ Prentice Hall
Lester,
A., 2000. Project planning and
management. Oxford: Butterworth Heinermann
Martin,
J., et al., 2009. Structured decision making as a conceptual framework to
identify thresholds for conservation and management. Ecological Applications. 19(5), pp. 1079-1090
Mind
tools, 2012. Decision Trees. (Online)
Available at: http://www.mindtools.com/dectree.html (Accessed 8 April 2012)
Nayab,
N., 2011. Advantages of Decision Tree
Analysis. (Online) Available at:
http://www.brighthub.com/office/project-management/articles/106000.aspx
(Accessed 8 April 2012)
Russell,
R.S., 2006. Operations management:
quality and competitiveness in a global environment. 5th Ed.
Hoboken: John Wiley
Schwenk,
C.R., 2012. Strategic decision making. (Online)
Available at:
http://findarticles.com/p/articles/mi_m4256/is_n3_v21/ai_17154315/ (Accessed 8
April 2012)
Sharma,
R., 2010. Advantages and disadvantages of
the Critical Path Method. (Online) Available at:
http://www.brighthub.com/office/project-management/articles/60960.aspx
(Accessed 8 April 2012)
Turban,
E., et al., 2004. Decision support
systems and intelligent systems. 7th Ed. Englewood Cliffs:
Prentice Hall
Yan,
J., 2002. Decision trees with a better
ranking prediction. London: Faculty of Graduate Studies, University of
Western Ontario
No comments:
Post a Comment