The business environment is constantly changing and managers have to constantly be on the lookout for such changes. Managers have to ensure that the current and planned operations of the business are aligned with the current and future goals of the organization.
Managers have several roles in any organization which include forecasting, planning, organizing and coordinating (Fayol). To be able to carry out their functions effectively, it is important for managers to take into consideration the information available, understand the risks of alternate strategies and come up with organizational plans.
Mintezberg has categorized a manager’s roles into informational, decisional and interpersonal roles (Mintezberg). In the informational roles, the manager is responsible for monitoring and dissemination of information within the organization. In the decisional capacity, a manager’s responsibilities include resource allocation and entrepreneurship. Information technology has increased the speed and breadth of data that can be monitored by a manager to carry out entrepreneurship activities such as brainstorming and project initiation and resource allocation activities such as setting objectives, creating plans, scheduling and budgeting.
There is however need to understand whether this has increased the speed with which managerial decisions are made. One of the most pertinent variables in the speed with which managers make decisions is their risk tolerance. The two most used decision making models used by managers are systematic and non-rational decision making. The first is based on logic and availability of all requisite information. Since it is impossible to have all information requisite information, managers must make decisions in a judgemental (non-rational) manner. Some of the techniques used include intuition and satisficing. Risk aversion is one of the non-rational factors that affect a manager’s decision making.
Information technology tools such as Decision Support Systems have led to improved decisions, faster gathering and analysis of data and speed of decisions when multiple decision makers are involved. It has been shown that risk tolerance and regret avoidance have a significant bearing on people’s decision making processes. However the effects of risk tolerance cannot be mitigated simply by the availability of more and better analysed information.
Risk-averse individuals are likely to fall into the trap of decision paralysis when faced a deluge of pertinent information. Risk-taking managers are the ones who benefit most from the availability of more and better analysed data when making their decisions. The methodology recommended for judgemental decision making by Howard Haiffa is that managers should review their intuition to see if it is in line with systematic analysis. When the systematic analysis does not conform to what the manager’s intuition is, they should keep probing until they are satisfied with the decision they arrive whether through rational decision making (systematic analysis) or through intuition. This can lead to even longer time for decision making, which is mostly offset by faster data collection and analysis. This leads to better decisions but not necessarily faster ones.
The speed with which individual managers make their decisions in not affected much by the availability of the information but rather more by the setting in which the information is presented in relation to risk tolerance. Change of setting is what actually changes risk tolerance and its effect on decision making speed.
Bibliography
Fayol, Henri. General and Industrial Management. Dunod et E. Pinat, 1917. Print.
Mintzberg, Henry. Mintezberg on Management. 1989. Print.
Mintzberg, Henry. The Nature of Managerial Work. Harper & Row. 1973. Print.
Hammond, John S., et al. "The Hidden Traps in Decision Making." Harvard Business Review. 1998.
Phillips-Wren, Gloria E., Eugene D. Hahn, and Guisseppi A. Forgionne. A Multiple-Criteria Framework for Evaluation of Decision Support Systems. Omega. 2004.