Managerial decisions are arguably the principal human behavior upon which any enterprise will flourish, just survive, or die. Enterprise results are frequently attributed to external conditions, such as a bad economy, raw material price increases, or emerging competitors, yet managers are presumed to have the “response ability” for dealing effectively with whatever conditions arise.
World-renowned sociologist and management scholar, Peter Drucker, saw management as the single most important role throughout any organization. He reasoned that every enterprise involves one or more people who assume the role of manager, with the expectation that these people will plan, organize, lead and control the enterprise so as to achieve its purpose. Managers provide critical decisions that, quite literally, determine what the enterprise is, and what it’s not.
The importance and consequence of managerial decisions should prompt us to question how mindful we are of our decision making. Do we consciously decide how we will make decisions, or do we, well, just make them? And is our decision making our personal best, or can we do better?
The work of managers is distinguished by its partial direct sharing in accountability for enterprise performance. Managers are prompted to make decisions by a wide range of situations that simply arise continuously in the course of enterprise development. In effect, a manager’s work is comprised largely of making decisions.
Nobel Laureate, sociologist and management scholar Herbert Simon further points out that managers are accountable for decisions they don’t directly make:
“The executive’s job involves not only making decisions himself, but also seeing that the organization or the part of an organization that he directs makes decision effectively. The vast bulk of the decision-making activity for which he is responsible is not his personal activity, but the activity of his subordinates.”
This implies that managers not only need to be mindful of how they themselves make decisions, they also need to be mindful of how others within their organization are making decisions. As any one moving up to a management role quickly appreciates, it’s one thing to be accountable for making a bad choice, but something else to be accountable for the bad choices made by others.
Science of Decision Making
Early theories of managerial decision making portray this work as purely rational, in which all-knowing managers identified and defined each problem, generated alternative solutions to the problem, and selected the optimal solution for implementation. As subsequent research revealed, this theory ignored several realities including a manager’s . . .
- Limited clarity in understanding ambiguous complex situations
- Limited awareness of alternative solutions and each solution’s consequences
- Limited reasoning capacity for ultimately selecting the optimal solution
Early theories also portrayed managerial decision making as purely objective and intentional, in which all-controlling managers literally defined the activity of organizations with logic and self-determination. Subsequent research revealed that some managerial decisions are sufficiently novel and unstructured to require managers to make definitive decisions. However, most managerial decision making becomes repetitive and routine, with managers making essentially the same decision in every similar situation. Furthermore, these decisions are often predominated by influences from two sources:
- Enterprise influences – decision rules, policies, procedures, KPIs, measured variables, rewards, threats, organization culture, and more
- Personal influences – paradigms, schemas, mental models, character, personality, preferences, opinions, habits, convenience, and more
Decision Making Process
Mindful managerial decisions entail phases of activity and thinking that first prepare a manager to make a choice and, after the choice is made and implemented, to learn if the choice achieved the intended result. These phases (in generic terms) are Analysis, Design, Choice, and Evaluation. In practice, managerial decisions can be more complex and the process less discrete than this framework implies.
Managers with especially challenging responsibilities can be expected to reduce their time consumed in the Analysis and Design phase activities by delegating some of this work to staff functions or consultants. These subject-matter experts are presumed to be more knowledgeable than managers about the area of expertise. This often results in a manager’s more important decisions being less mindful and more dependent on the effectiveness of these experts.
Beyond success or failure, managerial decision making determines how an enterprise operates, who it employs, how it spends its resources, how it treats its customers, and when and how to change. Managers are expected to continually factor new information into their decisions and to improve their decision making process. How else can organizations learn and improve over time so as to respond to a changing environment and operate in ever more effective ways?
Continuing research of managerial decision making reveals many traps managers can fall into unless they remain mindful of their decision making. Herbert Simon recognized that even managers do not have the raw intellectual capacity to maximize in their decision making. Rather, he portrayed management decision making as an activity based on the finite cognitive resources of human beings who attempt to achieve some minimum acceptable level of the desired variable. He explained that managers do not search for a complete understanding of any situation, criteria, or possible solution related to a problem. Rather, managers resort to “satisficing,” in effect making their decisions on the basis of known and easily accepted criteria and solutions. The search for a solution generally stops with the first alternative that’s good enough.
Karl Weick, a prominent social psychologist, contends that managers often do not realize that much of their decision-making activity consists of reconstructing plausible explanations after-the-fact to explain what they decided—a process he calls “retrospective sense making.” In other words, many managers only know what they decide after they see what they do. Despite management’s preoccupation with structure, objectives, evaluations, and accountability, their organizations are mostly created out of abstraction, subjectivity, making do, and arbitrariness, similar to other aspects of the human experience.
Notwithstanding the current practices or limited capacity of managers for making decisions in the context of complex circumstances, it has been well demonstrated that a manager’s capacity of effective decision making can be developed. Moreover, the method most often recommended for improving managerial decision making is simply mindfulness—paying attention and being consciously aware of how we make our decisions.
This great article is one in a huge series which tackles the 6 Biggest Challenges Leaders face according to theCentre For Creative Leaderships Report published 2013 Don’t Miss Out! Sign up here to be notified of our subsequent issues and posts