Decision-Making in an Uncertain Environment (Karen Moustafa Leonard Expert Advice)

by Karen Moustafa Leonard  on Monday, May. 19, 2014 12:00 am  

Karen Moustafa Leonard

We all make decisions every day. But in uncertain external and internal business environments, organizational decision-making is becoming a more complicated art. Both environments offer unique challenges for every leader. For example, external environments pose financial, regulatory, technological, and global challenges, as do internal factors, such as organizational culture and workforce issues.

Academics have studied the issue, and some have developed techniques to use in their professional as well as academic and personal lives. If you head an organization, you might find it helpful to understand how the term satisficing, a combination of satisfy and suffice, combined with proper decision-making techniques, can empower you and those you lead.

Satisficing is a term coined by Herbert Simon in 1947 to explain how a decision could be made when there is no single correct answer. Using decision-making techniques that navigate the perils of information overload help to overcome the defects inherent in satisficing.

Simon was among the first to create a model of decision making, and his suggested five-step process included the following: problem definition, formulating options, assessment and selection of options, implementation, and evaluation.

Let’s explore these in more detail.

• Problem definition is one of the biggest hurdles that organizations face. For example, a group of managers wanted to fire the secretarial pool because their work was delayed and often not done by the person to whom it was assigned. The secretaries, however, were not the problem; it was the way work was organized. Certain secretaries had particular specialties. One would do tables while another would do report typing and editing. The sheer amount of work made the pool inefficient, as they often did not know which work had priority. Replacing employees would have resulted in the same problem.

Addressing the problem as a workload issue allowed changes to be made without relinquishing competent employees. Distinguishing opinion from fact, then stating the problem in clear-cut terms, is vital. Leaders should gather information and look for underlying causes, even when the problem seems evident.

• Formulating options appears easy, but it requires thinking outside of habitual answers to conventional problems. Answers for past similar problems should always be considered, but they may not suffice to solve the current problem because of the changing nature of the environment. For example, if a machine breaks down, looking at the past solutions can be helpful but other answers must also be considered because the environment is different now. There are other machines on the market, perhaps, or different processes that are more effective. In addition, consulting with those involved may encourage creative thinking, and consultants who are not part of the organizational culture may offer an advantageous viewpoint. Having a solid understanding of fundamental communication and negotiation tools can help a manager achieve out-of-the-box thinking as well.

• Assessing and selecting options require that the consequences of several options be explored completely. This means asking various questions, such as: How will this meet the goals of the organization/department/unit? What are the main effects? Are there any side effects that are positive/negative – risks and return? How much will it cost in terms of money, time, resources, and people to implement? How much will it cost if it fails? What will be the reaction of various stakeholders? Will it address this problem without causing others? Is there a second option that might work if this one fails?

By asking these questions, evaluation and selection can be easier – and often easier if done by several people individually and then by the group as a whole. The option chosen must be clearly stated. By stating the option clearly, it is easier for those implementing the option to understand why and how this should be done. When considering whether to buy the same type of equipment or use another solution in a failure, sometimes the cost/output consideration is the only one used. However, new innovations may not be as simple to compare, based simply on this ratio. The other questions are extremely important in determining both which option to pursue and how implementation is achieved.

• Once implementation is complete, evaluation is required. In academia, evaluation, also called reflection, is the highest level of learning. This is also true in work situations, where reflecting on why something did or did not work assists future decision-making. For example, what was the financial, regulatory, technological, global, and internal environment at the time of implementation? Would the option work in a different environment? If we examine the chosen option for machinery and decide to purchase another one just like it, the decision still needs evaluating. Innovations are frequently the result of considering new options, rather than habitual responses.

In the not-too-distant past, most of us were preoccupied with lack of information. But in the new knowledge society, there is often too much information, which makes decision-making anything but a simple process. By using the decision-making model and understanding satisficing, decision-making becomes less confusing, although perhaps not less complicated.

Karen Moustafa Leonard is a professor in the Department of Management at the University of Arkansas at Little Rock College of Business. Email her at KXLeonard@UALR.edu.

 

 

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