1. Theoretical framework 1.1.

Decision theory

Decision theory divides decisions into three classes.

(1) Decision under certainty: where the managers has far too much information to choose the best alternative.

(2) Decision under conflict: where the managers has to anticipate moves and counter-moves of one or more compotators.

(3) Decision under uncertainty: where the managers has no information to chose the best information.

1.1.1.

The Contingency Theory of Decision Making Vroom and

Your decision is dependent on how it will affect other situations.

Yetton developed the model for the contingency theory for decision making in 1973. The theory states that the effectiveness of a decision is dependent upon various aspects of the situation. There is no simple way that is always right. The decision that is made is contingent on the following four factors.

1. Importance of the Decision

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The importance of the decision you are making must be considered when making your choice. For example, choosing whether to wear brown shoes or black shoes is of less importance than choosing whether to hire a new accountant for your company or not.

2. Amount of Relative Information Available

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You must consider the amount of information available regarding the choices you have to make. For example, you can select between the brown and black shoes if you know the style and size of the shoes. When deciding whether or not to hire a new accountant, you will need to know the qualifications, work ethic and experience of the prospective new hire. Your decision is based on how much you know about your choices at hand.

3. Acceptance of the Decision by Others

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Another determining factor in your decision is how well it will be accepted by others. For example, consider whether others will accept you wearing black or brown shoes with a particular outfit. Will your current employees be open and welcoming to a new accountant on your staff?

4. Disagreement of the Decision by Others

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Consider whether or not your decision will cause disagreement by others. If you decide to hire a new accountant, will your current employees disagree and not cooperate with the new procedures set forth by him.

(http://www.ehow.com/info_8680175_contingency-theorydecision- Making.html#ixzz1t5lYUY5k)

1.2.

Role of information in decision making

Information is a crucial element in decision making. Although having accurate, up-to date, compressive information does not guarantee a good decision. Lacking such information can guarantee a bad one. Information can be defined as data that have be converted into a useable format that is relevant to the decision making process. To make decision that will help their organization and be competitive, managers need timely and accurate information. (David L. page 524) 1.3. Amount of information in decision making

The condition that exists when people receive more information than they can process in a timely manner is known as information overload. The phrase in timely manner means in time to be useful in decision making.

Uncertainty, unproductive delays Problem cause by Information overload

Frustration

Confusion Too little attention given to important details Figure 4.1 problems of information overload

Too much attention given to unimportant matters

1.4.

How do managers know when they have made the right decision?

There are two ways to evaluate decisions. The first is to examine the results. In every case when a decision must be made, there is corresponding result that result should advance an organization toward the accomplishment of its goals. However, this is not the only way that the decision should be evaluated. Regardless of results, it is wise also to evaluate the process used in making a decision. Positive results can cause a manager to overlook the fact that a faulty process will lead to negative results more frequently than to positive 1.5. Employee involvement in decision making and its advantage

Involving employees in decision making can have a number of advantages. It can result in a more accurate picture of what the problem really is and a more compressive list of potential solutions. It can help managers do a better job of evaluating alternatives and selecting the best one to implement. (David L. page 523) 1.5.1. Potential problems with employee involvement

Involving employees in decision making can lead to problems. The major potential problem is that it takes time, and the managers do not always have time. Other potential problems are that it takes employee away from their jobs and that it can result in conflict among team members. (David L. page 524)

1.6.

Process of decision making

A significant part of decision making skills is in knowing and practicing good decision making techniques. One of the most practical decision making techniques can be summarized in those simple decision making steps: 1. Identify the purpose of your decision. What is exactly the problem to be solved? Why it should be solved? 2. Gather information. What factors does the problem involve? 3. Identify the principles to judge the alternatives. What standards and judgment criteria should the solution meet? 4. Brainstorm and list different possible choices. Generate ideas for possible solutions. See more on extending your options for your decisions on my brainstorming tips page. 5. Evaluate each choice in terms of its consequences. Use your standards and judgment criteria to determine the cons and pros of each alternative. 6. Determine the best alternative. This is much easier after you go through the above preparation steps. 7. Put the decision into action. Transform your decision into specific plan of action steps. Execute your plan. 8. Evaluate the outcome of your decision and action steps. What lessons can be learnt? This is an important step for further development of your decision making skills and judgment. Final remark in everyday life we often have to make decisions fast, without enough time to systematically go through the above action and thinking steps. In such situations the most

effective decision making strategy is to keep an eye on your goals and then let your intuition suggest you the right choice. (Harris, 2009)