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Topic 1. Introduction to decision making
The role of decision making in management.
The concept of organizational (managerial) decision. Types of organizational decisions.
3. H. Simon’s model of the decision making process
The requirements to organizational decisions.
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The role of decision making in management.
Before we start discussing managerial decisions (управленческие решения), let us briefly look at management itself. Management is a process used to achieve organizational goals through the utilization of resources ( people, money, energy, materials and so on ). The resources are considered the inputs, and the attainment of the goals - the output of the process. The degree of success of the manager’s job is often measured by effectiveness (результативность) and efficiency (эффективность). Effectiveness reflects the degree of attainment of organizational goals, efficiency is measured as the ratio between the outputs and inputs.
Effectiveness and efficiency are a major concern for any organization since they determine the well-being of the organization and its participants.
The level of effectiveness and efficiency, or the success of management, depends on the execution of certain managerial functions such as planning, organizing, motivating, and controlling. To carry out these functions, managers engage in a continuous process of making decisions. According to Herbert A. Simon[1], managerial decision making is synonymous with the whole process of management. To illustrate the idea, let us examine the important managerial function of planning. Planning involves a series of decisions such as: What should be done? When? How? Where? By whom? Hence, planning implies decision making. Other functions of management such as organizing, motivating, and controlling can also be viewed as composed of making decisions.
Henry Mintzberg[2] also recognizes the importance of decision making in management, however he does not equate management to decision making. In his book “The nature of managerial work” («Природа управленческого труда») (1973), he identifies ten managerial roles and shows that four of them are directly connected with decision making.
Anyway, good decision-making is a vital part of good management, because the quality of decisions determines how the organization accomplishes its goals.
Decision-making deals with problems. A problem arises when an actual state of affairs ( реальное положение дел ) differs from a desired state of affairs, i.e. when there is a gap (разрыв), or a mismatch (несоответствие), between what actually exists and what should exist. Problems can be connected with:
- a deviation from past performances;
- a deviation from a set plan;
- an improved performance of competitors, which sets a new target for the organization.
Managers may, for example, have to deal with a problem of absenteeism (прогулы). The gap in this case is that present attendance at work differs from what is expected. Problem solving is the process of working out ways to resolve the situation by closing the gap.
However, in many cases, a problem may be an opportunity in disguise (скрытый, замаскированный).
It is not always clear whether a situation faced by a manager presents a problem or an opportunity. The two are often intertwined. For example, missed opportunities (упущенные возможности) create problems for organizations, and opportunities are often found while exploring problems. David B Gleicher, an American management consultant, provided a useful distinction between the two terms. He defined a problem as something that endangers ( угрожать ) the organization’s ability to reach its objectives and an opportunity as something that offers the chance to exceed objectives.
According to Peter Drucker[3], opportunities rather than problems are the key to organizational and managerial success. Drucker observes that solving a problem merely restores normality (нормальное состояние ), whereas the exploitation of opportunities leads to progress. Drucker links exploitation of opportunities to effectiveness – finding «the right things to do», and concentrating resources and efforts on them. When decision making is linked to opportunity finding, it clearly involves choosing actions that can help make a future for the organization.
Thus, decision-making is the process of identifying problems and opportunities and selecting a course of action to deal with a specific problem or take advantage of an opportunity. Managers identify problems and look for opportunities, make decisions for solving the former or taking advantage of the latter, and monitor the consequences to see whether additional decisions are required. It means that decision-making involves effort both before and after the actual choice.
Decision-making is not easy. It must be done amid ever-changing factors, unclear information, and conflicting points of view.
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