Article (April-2020)

Articles

Dynamics of decision making

Dr. Upinder Dhar & Dr. Santosh Dhar

Designation : -   Vice Chancellor & Dean - Faculty of Doctoral Studies and Research

Organization : -  Shri Vaishnav Vidyapeeth Vishwavidyalaya, Indore

01-Apr-2020

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The use of information technology has helped companies become more efficient and transparent in their decision-making. Earlier, the most important decisions were kept secret because the process was not open. It was often done behind closed doors. The logical reason given was that decision-makers do not want outside influencers to prevent an impartial decision being made and a free and frank discussion from being held. On the other side, the secrecy would shut off outside debate, opposition and the flow of information. It also sheltered decision-makers from being exposed and presented in a way that would damage their image. Decision-makers considered themselves leaders with the responsibility to act on behalf of others. The justification for the secrecy would be that the decisions and actions might not be pleasant but shall have to be taken, in the long-term interests of all concerned.

The reality at times would be that decision-makers had their own secret agendas (sometimes, unfortunately, these were unethical and in the self-interest of the decision-maker only) and did not want this to be disturbed or undergo a rethinking due to pressures from various stakeholders or otherwise. The secrecy of the decision-making process was often carried into the recording of proceedings. Often, only the decision was recorded and not the process by which it was reached. Most often the recordings were treated as classified information not meant to be accessed by the public. This protection was given sanctity by giving references to "national security interest" or "company interest". Studies have shown that many important decisions have been made on the basis of : Vague and inadequate information; Emotions given importance over logic; Evaluation not done on costs, benefits and the consequences of the decision; and dominating personality playing a decisive role in arriving at the decision and creating the phenomenon of "groupthink".

Public debates do not fall in the category of decision-making as the speakers have already made up their minds and want to put forth their stated positions. Decision-making by voting after debates is not generally influenced by what is presented to them, but by predetermined stands, political affiliations and lobbying. Decisions are a characteristic of the "rational world" where "choice" is possible. If there is no choice, no decision is required, only understanding and acceptance. The rational world works on facts and information, which are obtainable and observable. Information technology (IT) can create the ecosystem for rational decisions by: Offering infinite scope for obtaining, analyzing and presenting information so that there is transparency, objectivity and overall view of all aspects involved, with cautions where information is inadequate or inappropriate; Recoding the process by which the decision is reached; and Evaluating the decision against various criteria.

Making right decisions

In the past, intuitions played a major role in decision-making. This was because the cost and feasibility of making decisions using information did not justify its collection, analysis, presentation and discussion. The experience of the decision-maker played a key role. The logic of the decision was often difficult to explain. Those consistently making good decisions were credited with some extraordinary powers and could command a price. CEOs that could show growth in profit and stock market appreciation managed their companies in the way they liked without any-one daring to challenge their decisions. Added power went to the centralized decision-making authority as experienced people were often promoted to the positions of authority, thereby combining experience with authority. As companies grew, the expansion of organizations either followed lines based on territory, area, region, country, continent and product or along the lines based on function and specialization like marketing, pricing and scheduling. The centralization of decision-making became a bottle neck and was very wasteful, time-consuming and unproductive. Large corporations found themselves under threat from smaller companies, which had greater flexibility in decision-making. Delegation of authority and decision-making to the new units that were set up was felt to be the answer. But, the model of decision-making in the parent organization was replicated in individual units. The final decision still rested with the heads of the units as decision-making at the point of action was considered too risky. Why is this so?

Delegation can be made only when : The decision-making rules are clearly spelt out; Roles, responsibilities and authority are clearly defined; The business is stabilized and there are no major deviations and exceptions; and People are centralized within those of the management and, hence, the decisions they take are likely to be identical to what the top management would decide. But when these conditions don't exist and discretion has to be adopted, the issues have to be referred up. This also justifies the continuation of the hierarchical structure to take difficult decisions. Such decision-making cannot be taught to newcomers, as they are not based on rules. In fact, this ability is the source of power, which cannot be easily renounced by the managers. In the classical organization structure, each unit functions as an independent silo. Systems are designed to suit these individual units and are highly fragmented. The entry of others to the information available is restricted or even forbidden. The unit alone can decide what information to release to others. Turf and territory are zealously defended. This may be in the interest of the unit but not the company as a whole. The approach is very wasteful, as time and effort are required to go through the hierarchy of each unit separately to get information. Further, the information may not fit the objectives being pursued. The integration of information obtained from individual units becomes an exercise in itself***.
Experience-based decisions have been found to be defective and sub-optimal when tested against decisions based on information using science, knowledge and technology. This is because decisions based on experience, while being valid and important; do not consider the changed situation and what is possible with the latest technology. They also contain hidden safety values so as to avoid failure and embarrassment. Experience-based and ad hoc decisions are taken at organizational levels where they cannot be easily challenged as authority to take those decisions has been vested in those positions.

Effective planning and decision making

The Mahabharata would have been a lot different had Yudhistir overcome his love for gambling and decided to turn down the offer of a game of dice with the Kaurava that led to loss of his kingdom, had Drona not made Eklavya cut his thumb as 'Gurudakshina', had Duryodhan accepted Krishna's peace proposals when latter presented them to the former in the Hastinapur court, had Duryodhan chosen Krishna over his army in the Kurukshetra war, had Abhimanyu given some thought to an escape plan to get out of the spiral formation at the time of war. Making the right decision is a key in the corporate world. One needs to be backed with the right information, have wise counsel, have foresight and put one's gut instinct in full gear to take the right decision.

Making right decisions is backed by effective planning. The Pandavas won the war of Kurukshetra, because they had played their cards well. In the 14 years of their exile, they had got down to the grass roots and interacted with the 'aamjanata'. They knew the pain points that could trigger action. In this period, they also worked on their weaknesses - Arjun acquired more knowledge about weapons, Yudhistir mastered the game of dice by learning it from Gandharava Chitrasena and Bhima through his adventures found allies and increased his strength. By making the right alliances through marriages with princesses of powerful states, the Pandavas established a strong and effective network of allies.

The Kauravas on the other hand (Duryodhan and his brothers) were mostly docked inside their palace gates and ruled the kingdom through remote control. It was Karna who went to different parts of the country and forced kings to swear allegiance to Duryodhan and in the process made many enemies, who eventually helped the Pandavas at the time of war. In the corporate world too it is important to be on the field. Whether it is Toyota, Dell, Sony, General Electric, the Tatas, Reliance - every company has to first understand its markets and customers and then devise its strategy.

In the legacy systems, the rules are evolved over time to suit specific situations. As people change positions, the background of why a particular approach is taken is forgotten. But nobody is prepared to make a change even when the situation is different. Taking decisions based on first principles and challenging assumptions demands the hard process of thinking, along with courage for which few are prepared. The belief that there is security and safety in tradition therefore, history rather than logic determines what should be done. There is a need to understand that new challenges generally cannot be met with old solutions as there is change in the new context.