Quantitative Decision Making
Decision making procedures for a management involve mostly the manager first deciding on the work plan of the organization, laying the duties of each member of the staff, and controlling the execution of the preplanned tasks for the organization. When each task has been performed, the manager checks to ensure that the process was successful, and does an evaluation of its productivity over time (Klein, 2001).
The steps followed by decision makers may include, the definition of the problem, identification of limiting factors to the solution or decision, identification of the options to be exploited, the analysis of the options, picking on the best option, the implementation of the best option and finally the establishment of an effective monitory and evaluation system.
Some common ways of identifying a problem is by observation the existing operations and checking whether they are producing optimally at that particular time and with the existing conditions. If not so, then check the symptoms of the problem. Some signs of low productivity include declining sales levels, less profits achievable, high operational costs, lack of motivation and high turn over rate for employees (Michael, 2002). For these cases, the managers should embark on appropriate market research, redesign the systems and duties, retrain the staff, give incentives to motivate the staff, improve on the communication strategies, and generate better management strategies by the use of both qualitative and quantitative measures of decision making in the firm.
Limiting factors that could face the management could be lack of information and appropriate human resource, or inadequate time for the implementation of new system as well as the reluctance found in most employees. If a manager would like to make the best decisions, they should embark on the solution for the problem in hand at each particular moment of problem solution. He she can also accept any new suggestions and effects after validation (Madu, 2003).
Also, the exploitation of an idea to its exhaustion is important to avoid the contamination of a hybrid kind of thought by others in the environment. The process of coming up with different options may need the application of techniques like brainstorming, Delphi technique or even the nominal group techniques. Among these ways of exploring alternatives, none may be perfect and the manager should be keen to involve other members of staff although not always. These staff members help to build new progressive ideas and generation of teamwork spirit in the company where every participant feels part of the decision and ready to assisting the development of the group at large.
Quantitative decision making skills can be applied especially when one has an already clearly defined objective, or there is a measure of value that can be calculated in different options that may exist, and also when one has various options on the course of action to be taken. When using quantitative decision making strategies, there are a number of exceptions on its applicability, for example some situations may be out of control by the decision maker or there would be uncertainties on the expected result (Reppeto, Austin, 1999).
In addition, a variety of decision making tools are used in quantitative analysis. They include simulation, payback analysis and decision making tree. Decision making is a process which requires one to be equipped with statistical analysis skills such as probability and estimation skills. For example, if we could discuss a little on the payback model of decision making, which has various categories of combinations focusing on the profit levels and demand levels of given commodities in the market.
These combinations help the manager to estimate the optimum time when heshe is able to market good or services and gain maximally. When this optimum point is exceeded then the profit levels may decline while the demand on the other hand will hike. The different level low, moderate, or high demand levels may coincide with the equivalent levels of profits or costs thus the decision maker scrutinizes the different level up on which heshe selects the best combination for optimum profits. If by any chance the decision maker choice the highest profit against high risk then he should be very optimistic to forgo the risks or manage them.
If for example, a manager has invested in a car hire business or the sale of cars or phones for instance, this manager must be keen on the demand of his commodity in the market being able to determine the tests and preferences of the customers, understand their current need and technological advancements (Rachana, Anil, 2008). This kind of venture will require the trader to establish best offers for clients especially on maters, like the warranty of the equipment they are selling insurance costs incurred for the business, repair and maintenance costs of the equipment being dealt with. This will enable the mangers to evaluate on profit levels by analyzing the incurred cost.
Once this kind of feasibility, economic, and financial analysis are all studied the data is further analyzed to come up with the best option of business operations. The decision making trees usually supply a display of applicable options in making decisions that makes it possible for the decision maker in management come up with graph of alternative paths for the decision. These trees are commonly used in the analysis of marketing, purchase of equipment, and design of investment plans, when to hire services or making pricing decisions.
The same can be used in evaluating the progress of a business hence appropriate in risk management in a business. The decision tree is designed like a factor tree in mathematic that can be used to trace back and forth the effects of taking a particular decision and not another. This is best used in making decisions related to operations that are sequential in the system laying emphasis on the probability of an occurrence and its alternatives decisions that could apply.
Simulation approach of quantitative decision making is on the other hand, is any attempt towards mimicking an existing operation. In simulation, the simulator tries to come up with model similar to an existing system by copying and testing highly the simulator may end up with the best possible manageable system (Madu, 2003). This will assist in appropriate decision marketing thereby eliminates decision making by guess work.
Generally, quantitative tools are used in encouraging an improved decision making quality. They invoke the thinking and judgmental ability in a manager which in effect supports the development of business practices.
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