Organizations should make their decisions in a rational manner. As we see business fall daily by the wayside we see that many are failing to act in such a manner. Much of these failures are due to poor decision making processes which can be tied to numerous factors as misplaced loyalties, greed or just plain ignorance. I will try to describe the manner in which a successful business should have its decision making processes. In any decision that one makes there is a problem at hand.
Wither its something that is an actual “problem” or something that needs to be done. The first thing that must be done is to identify the problem. This must be done first. I will use the relationship of a doctor and his patient as an example. When a doctor treats a patient for an aliment, he can not diagnose a course of action for the patient to recover if the aliment is not found or determined. Now that a problem has been determined all information pertaining to its cause and solution must be gathered.
We then determine what is most important for our patient and all relevant criteria. We must understand the consequences that will occur with each alternative. For the wrong medication or treatment may injure or even kill our patient. We know that he must live and we desire him to have physical health.
Increased stamina and ability to participate in recreational activities is also important to him. Now we must weight the criteria and determine what is most important. From our complied list we determine that living is the number one priority. After that the order follows in general physical health, increased stamina and his ability to participate in recreational activities. How can we treat our patient is to meet our desired order of criteria. The medications and treatments must be weighed against our criteria.
The Homework on Decision Analysis Problems
Many decision analysis problems can be viewed as having three variables: decision alternatives, states of nature, and payoffs. •Decision alternatives are the various choices or options available to the decision maker in any given problem situation. On most days, financial managers face the choices of whether to invest in blue chip stocks, bonds, commodities, certificates of deposit, money markets, ...
It has been determined that with a change of diet, some medication and exercise is the best course of action. Fortunately for him this covers all criteria. But in some cases the required route will not, such as a patient with cancer requiring chemotherapy, which would all him the possibility of living but decreasing his chances of fulfilling the other criteria. The decision has been made, and the optimal choice (which matches the most criteria) has been made.
Because the doctor is a highly trained professional and has had years of experience he was well qualified to make these decisions. From his experience with other patients he has seen the results of this aliment with various medications and treatments. These were called up in his mind at the decision making process. This is called bounded reality. The choice is made based upon the must successful treatment which he has seen.
He is satisfied that this will have the desired effect upon the patient. In any decision made there is an amount of intuition used. It calls upon that which is natural and has been learned by the individual. The doctor called upon his schooling and experience to formulate initially what the problem with the patient was. And further investigation either proved or disproved his intuition. If this process is followed of rational decision the doctor has a greater chance of meeting the needs of the patient but if not then the patient may receive harm due to neglect or wrong treatment of that which ails him.
It is the same in the business world, if the decisions you make have not been thought through rationally and tested they may have an adverse affect upon your companies profitability and survival.
