Background and Introduction

Decisions are made everyday, and it is described as intelligently processing information that will result in rational decision making. A manager undertakes the responsibility of making rational choices by being logical and consistent in a decisive manner. Assessments of descriptive, normative, and behavioral decision theories will be the theoretical foundation of this paper. Also, the three different theories will be discussed in relation to teamwork, diversity, and the ethics of organization.

Main Conclusions

The theories examined in this paper illustrate three different types of decision making; each of them influences the process of decision making in an organization differently. The descriptive decision theory concentrates on the immediate solutions, while the normative decision theory has an idealistic standpoint – opposites of extreme. The behavioral decision making theory acts as a middle-man where its main purpose is to be the mediator between the descriptive and normative decision theory. In spite of their differences, all three theories share one common feature: rational decision in any give circumstances.

Recommendations

In order to run a successful organization, management has to understand the different theories behind decision-making process. Even though the theories are bounded by rationality, each theory values teamwork, diversity, and ethics at different levels. Thus, different levels of managements use different types of decision making process for the survival of the company. It is important to clearly distinguish the theories’ boundaries and limitations to successfully decide which variables are important at each level of an organization.

Decision-making

Decision making is not specifically reserved for the management; is done daily by everyone. From choosing home appliances to family dinner preparations, decision making is a part of everybody’s daily routine. To better comprehend the managements’ role of decision making in an organization, three theories of decision making will be discussed: descriptive, normative, and behavioral theory. However, for the purpose of easy comparison and contrasts, the theories will be analyzed in relations to management types: i.e. technical mangers, organization managers and institutional managers.

Background:

Decision making is more than randomly choosing an option, but a cognitive process or a thought-out process to achieve rational decisions. Individuals, from all levels of an organization make decisions. Not all decisions are multifaceted, but their decisions affect their job securities as well as the organization’s interest. A successful decision making process involves rationally analyzing the problems to achieve the most efficient choice that will compliment the situation. According to Walls “the premise behind rationality in organizations is based on the notion that reasonable people will respond to their environment by assessing known facts, estimating possible outcomes, and weighing those outcomes against their respective costs Decision making process differ from one level of management to another, however, they all share common responsibility; rational choices that are consistent, and “value-maximizing choice within specified constraints

Descriptive Theory

The descriptive or positive theory is a black-and-white concept where individuals visualize how things are rather than how things should to be. Descriptive theory focuses on the choices made in a situation, and considers decision as a single event  According to Shrode & Brown, the “descriptive decision theory is based on describing, as precisely as possible, the actual decision-making behavior of the decision-maker” and “how people…make decisions”. In a relation to management type, descriptive theory is associated with the technical managers, where their primary concern is to solve problems immediately and “have a short-run time horizon” Computational decision making strategies utilized by the technical managers allow them to solve problems swiftly and effectively since the solution to problems are accomplished by “computing various types of input and output data, and then manipulating the data in accordance with the criteria of rationality” According to Petit, solutions to technical managers problems are “quantitative in nature” and “concerned with concrete problems that require immediate solutions”

Normative Theory:

The normative theory, also called prescriptive theory, narrates how things should be, and lean towards philosophical approach in decision making. This particular theory utilizes well informed and rational individuals to organize alternatives that will lead to a successful end result that will benefit the organization in the long run. The normative theory carries ethical responsibilities as well as guidelines to seek optimum solutions. Thus, the normative theory “attempt to describe the behavior (or hoped for behavior) of a human decision maker…who wished to use intellectual tools to make decisions”. In relations to management type, normative is closely linked with institutional managers (IM) because they “have a philosophic point of view” and “rely in wisdom, experience, and philosophic insight in making important decision.” Decision strategy for institutional managers’ are judgmental because IM “have a long-run time horizon…The future is always hard to read and is highly qualitative: therefore it is interpreted subjectively.” Institutional Mangers’ primary responsibility to the firm is to insure firm’s survival by managing uncertainties of firm’s environment.

Behavioral theory

Behavioral theory implicates how people deal with uncertainties, and takes into an account both the descriptive and normative theories. Behavioral decision theory is bounded by rationality of the world, and the decisions are made based upon decision-maker’s perception on given situation. According to Brooks, Highhouse, et al, “behavioral decision…has shown that people’s judgment do not always derive from their underlying beliefs, but rather from the need to formulate their opinions as a result of having to express them.” According to Petit “behavioral theory of management has most in common with the social system school…social system school focuses on the organization and what we have called the organization level of management” The organizational managers synchronize technical and institutional managers’ transactions by acting as the mediator or an intermediary. Thus, the decision-making strategy of an organizational manager is to compromise in the interest of organizational viability.

Theories in relevance to teamwork, diversity, and ethics

Depending on the level of management or the structure of organization, variables such as teamwork, diversity, and ethical factors might illustrate an issue. It can increase the complexity of management’s decision-making issues. However, incorporating the variables into different management decision-making can increase open-line of communication, generate additional alternatives and ideas, and increase accuracy.

The descriptive decision theory focuses on immediate resolution of problem with little or no concerns to ethical issues, teamwork, and diversity. This is mainly due to the fact that the speed and the efficiency of decision-makings are valued rather than comprehension of knowledge and ideas. Descriptive theory is “concerned with the choices actuall

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Managerial ethics illustrate a rather sensitive issue. The recent business history has proven ethics as a rather challenging objective of larger organizations. The following topics / views may illustrate fundamental issues in the current debate. The current competing views include “Maximize Profit” and “society’s welfare” . Maximizing profits illustrate the greatest commitment to shareholder and stakeholders. In this particular theory, the managerial staff is only committed to maximize the bottom-line in terms of profit: a mean to an end in order to achieve the highest possible profits. Society’s welfare illustrates a common goods approach. In this particular approach managerial staff attempts to achieve a balance between the bottom-line and social welfare of the society and employees. It is of great interest to explore the theoretical aspects of managerial issues and compare them to real practices. The two above name theories assume that managerial issues are constrained and objective; stakeholders vs. society. On the other hand, the reality proves a rather multi dimensional reality; stakeholders vs. society vs. culture vs. religion vs. politics vs. diversity vs. personality vs. globalization vs. many other unpredictable factors. Further, both of theories appear to be better suited for larger organizations: small businesses encounter more immediate issues such as revenue and cash flow rather than managerial ethics. Most small businesses ran by savvy business people are less concerned about ethics. Out of extensive experience in consulting small businesses, I can confidentially stat that I have never met a small business owner that was not willing to take unethical actions in order to maximize profits. Given the fact that this is not a scientific statement, it is important to view this statement in terms of personal experiences, which conflicts with the academic management practices.Moreover, there is more to the issue of ethics. Given the fact that both competing theories consider some sort of managerial responsibility to some one or some group, illustrates a major weakness of both theories. Both theories fail to point to the necessity of “perception”. It is hypocritical to expect only one segment of a society i.e. businesses to create value or consider societal consequences. Thus, most business simply attempt to create a perception of societal responsibilities rather than genuine concerns In terms of creating profits, it is important to understand that in practical terms, it is difficult to create social awareness or consider social issues without being able to prove their value to the business shareholder or stakeholder. Thus, any managers’ first priority should be profits, Once the objective of achieving the highest possible profits have been achieved, an organization can effort to pursue alternate goals of societal concerns and improvement.Some people may argue that societal benefits / concerns may have a direct influence on the bottom line of any given business. However, it is important to point to the fact that it is extremely difficult to quantify the direct impact of societal charity work on corporate profits. It is merely possible to use anecdotal and qualitative data in order to assign arbitrary real value to such social actions. Ultimately, it is important to consider the main goal of any given company i.e. profits. It is further important to allow for businesses to pursue and achieve their goals before they can be expected to become beneficial corporate citizens.

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The first and most important aspect to me is the “If it works, use it” concept. I strongly believe that there are only legal limits which may hinder a business to do whatever it takes to succeed. Otherwise, moral considerations should be put aside to create platforms and procedures to maximize profitability. I believe that moral consideration is a question of “affordability”: those organizations that have reached the maximum profitability can effort to have moral standards. Otherwise, it is a fair game as long as no law is broken.

The second significant factor is the adaptability factor in self monitoring: “Individuals high in self-monitoring show considerable adaptability in adjusting their behavior”. I am convinced that those with conscious self monitoring factor realize the need for “whatever it takes” concept to achieve the greatest results for their organization. It is clear that such individuals realize that in a competitive work environment it is vital to adapt to all existing factors in order to create a greater sense of personal involvement, thus promoting organization goals.

The third important personality factor is risk taking: “To maximize organizational effectiveness, managers should try to align employee risk-taking propensity with specific job demands”. It clearly ties in to the previous concepts of Mach and adaptability: a manger will eventually have to realize that risk taking is simply a part of everyday business life. The best decisions can not always be made with complete information, rather than specific uncertainties will always be present. Thus a good manager will be willing to assess a situation and make a decision with the understanding of relative risk.

Ultimately, it is clear to me that a successful manger will have the ability to do what it takes by adapting to all existing factors with consideration of certain degree of risk. I believe that such characteristics are rather universal and independent from industry, market and economy fluctuations. Yet cultural and social factors may dramatically change the overall effectiveness of such approach.

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http://consultancyissues.blogspot.com/

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Machiavelli has been known to me in a different content, mainly politics. The Prince is one of the most read pieces of literature in political science. I never thought of “Machiavellian concept” as a business concept.

Here is an example out of recent personal experience: a recently acquired client was in dire need of some supplies which were hard to come by. Due to some existing agreements and some arm twisting of manufacturers we were able to provide a swift delivery of the goods. Here is where the moral and legal component comes in. Should we bill the client for our existing logistical competence? The client needed the hardware but so did almost everyone else in the same industry. Should they pay for our “contacts”? Doesn’t the concept of “what ever it takes” dictate that we should be able to make money no matter what? From a legal stand point: Is this similar to insight trading?

There are many other similar moral and legal obstacles that may prevent a manager to describe themselves as Machiavellian at all the time. I would suggest that Machiavellian concept is a theory that may only apply at some particular situations. Thus Machiavelli is a piece of a greater puzzle i.e. successful management.

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