Therefore, this should be used only after considering other alternatives. By planning you can thus accomplish things that might otherwise look impossible. (9) Principle of Proportionality of Resources: According to this principle, decision to utilise the available limited resources of an organisation should be made on the basis of proportionality. Only that alternative should be accepted which can yield the maximum profit. In this context it is said, ‘Listen to everybody, but do according to your Judgement’. This alone can ensure their cooperation. The decision maker has complete information regarding the decision situation.
Let’s explain decision tree with examples. Therefore, a manager, before taking a decision, should ensure as to which information is essential. A decision represent course of behaviour chosen from a number of possible alternatives. This is what Herbert has called the ‘principle of bounded rationality’. The only difference is that in today’s business environment, the decision-making is getting more and more complex. The fact remains that managers continuously take decisions and initiate steps to implement them. He makes decisions which are good enough and do not make undue demands on his time, efforts and money. In the examples, taken under the ‘Decision-making process’, there is an alternative of purchasing new machinery but because of the non-availability of adequate finance new machinery cannot be purchased.
Of course, a satisficing decision is much easier to make than an optimal decision. This principle means that a decision-maker should find out as to what an organisation can accomplish and what it cannot do. (iv) The individual does not search for the best solution, but for ‘good enough solutions’. These limiting factors are liable to change in accordance with the changing circumstances. Operations research seeks to replace this process by an analytic, objective and quantitative basis based on information supplied by the system in operation and possibly without disturbing the operation. This information can then be used to guide you in the right direction and support your business decisions. Steve is a Product Development Manager at Telstra Wholesale. What is a Bank ? However, if there is only one alternatives, there is no decision to be made. 5. The traditional theory of complete rational and economic man cannot work in practice. He thinks about the problem and an answer is found in his mind. At the time of taking decision it should be kept in mind as to what impact it shall have on the persons concerned and what will be their reaction. These decisions are of a routine and repetitive nature. But perfect rationally is a norm which can be aimed at but not attained. Rationality in Decision-Making 11. Policy, Administrative and Executive Decisions: Ernest Dale (born in Hamburg, Germany and died at the age of 79) has classified decisions in business organization as under: Policy decisions are taken by top management or administration of an organisation.
Some of the decisions are of routine nature and it might be that the manager does not realise that he is taking decisions. Techniques used for programmed decisions include standard procedures and rules, organisational structure, etc.
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