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Mngt2006 Decision Making Under Uncertainty Assessment 2

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Decisions are planned at every stage and the management process begins from planning and planning originates from taking effective decisions. Every decision is taken for the benefit of the organisation. But there are times where decisions can lead to the downfall of the company. Every organisation has their own style of decision making and every decision is handled for the growth of a firm. There are three conditions which are associated with the decision making and they are certainty, risks and uncertainty. Certainty is one of the most preferable conditions while making a decision. If the individual knows all the possible outcomes and conditions, such conditions are referred to as certain conditions. One of the most widely prevalent factors influencing decision-making is risk. In a risky situation, the decision-maker may be fully aware of the issue and the information, yet there is no assurance that any option will be successful. When there are unstructured difficulties, a risk condition exists.

Main Body

Evaluating the various processes of decision making, outcomes and contingencies. During any crisis the circumstances change which may trigger for a change. The complexity, uncertainty and dynamic nature of crisis requires a Decision -making process. Majority of the decisions are value based and we rely on the expected outcomes (Marchau et al., 2019). After incorporating the chosen behaviour the outcomes are contrasted and the various errors are reduced. The decision making process starts when the real problem is identified. The decision making process where the manager takes the proper decision which is entirely based on judgement and prediction. Decision making is present in two phases : preparing the decision and making the decision.

Situations of uncertainty involve the facts where the problems are not known. The data and information are not known and one cannot predict the possible conditions. If the situations are under risk lack of an objective and empirical record regarding the likelihood of future conditions characterises risky situations and decision-making under uncertainty (Raab et al., 2021).

For making effective decisions in crisis situations people have to follow certain steps. First of all one has to confirm the authority and direction of the decision (Diederich and Trueblood, 2018). Secondly one has to establish psychological safety, record discussions. Using facts and tacit knowledge will help the individuals to understand the root cause of the crisis and take effective decisions. The crisis management teams use explicit knowledge which can be conveniently managed and accessed. It consists of learning and skill of cognitive ideas. Human minds gather the skills and knowledge by prior experience, insights and By managing expectations one can easily influence attitudes of a person. If the expectations are misunderstood it can further lead to disappointment, frustration and also anger. The effective internal skills and communication skills are necessary to manage the expectations. Cognitive bias is the term for a systematic mistake brought on by our subconscious mind's employment of streamlined information processing techniques. These prejudices are a constant factor in all decision-making and may become more pronounced in dynamic, complicated, and unpredictable situations. There are three prevalent cognitive biases that influence decision-making in a crisis:

Anchoring bias is the propensity for people to base their decisions on one attribute or information piece too much and then make adjustments based on that value to take other factors into account. Overconfidence bias is another bias which is required to be handled properly in a decision-making process. The most significant step while managing the bias is to create the decision making process a tool to represent the bias. 

The various steps involved with the decision making approach can be stated as follows.

Recognising the decision:  in order to make an appropriate decision one have to clearly define the nature of decision they are undertaking. If someone has to make a decision they have the realise the importance and the type of decision they are going to take (Umass, 2022).

Gathering useful and effective information:  One should gather appropriate and adequate information before taking the decision. One has to understand what type of information is required for undertaking the decision. This step is very crucial and it consists of external and internal tasks. Either the information is gained through past experiences or iot can be available from the various literary sources such as books, journals and various sources.

Judging the value of evidence: The evidence that one gathers needs to be evaluated and see whether it will meet their requirement (Umass, 2022). As one passes through the internal process there is higher potential for gaining the goal. The alternatives are listed according to their level of priority.

Chasing the best alternative: It is always necessary to choose the best alternative while making rational decisions. The choices can be a combination of various alternatives while choosing the right decision.

Taking proper action: The individual has to incorporate the best alternative which has been chosen in the previous step. It is the best time to put into action the alternative that has been prioritised in the previous sections.

Reviewing the decision and consequences: In the last stage the results of the decision are evaluated and whether it has fulfilled the need that has been identified in Step 1 is recognised. 

The various decision-making theories and their implications

One of the key concepts is the "decision-making theory," which was first put forth by Herbert A. Simon, who won the Nobel Prize in Economics in 1978. The most well-known aspect of him is his behaviorist work on commercial decision-making. The idea of decision-making outlines what prudent people should do in uncertain and risky situations. The theory holds that in order to effectively manage a personal, corporate, or governmental organization, making decisions includes adopting and putting logical decisions into practice. The theory suggests that making decisions entails choosing one choice from a variety of possibilities. The choice of whether to take action or not is another example (Unacademy, 2022). A descriptive theory, the Simon decision-making theory gives a detailed overview of the situation in which judgments are significant. The pricing or outputs in this situation will be determined by decisions. According to Simon's idea, decisions are made by choosing one alternative from a variety of available options. Even taking or not taking action can be the selected choice.

The theory assumes the significance of a decision and how it is applied. In the absence of Simon's views the various actions can match the effective circumstances and there are various ways to take effective decisions on the information . In this theory Simon took the psychological aspects. The employees have to rely on various factors like stress and motivation to ascertain the risk of uncertainty and risks. The theory states how the adequate and appropriate result is considered. The strategy provides a result which has minimum risk and maximum profit. The decision making process is categorised into three steps.

Intelligence activity stage: It is the process of decision making where the leaders can recognise the problems of the organisation. On the basis of some issues arising the management will identify some solutions which can be incorporated to give a suitable and sustainable environment.

Designing the activity stage: this phase studies the various strategies which can be implemented to identify the solution to any issue (Unacademy, 2022). The main feature of this stage is to evaluate the strategy on the abscess of advantages and disadvantages. The management assesses the pros and cons and decides which strategy to be applied.

Choice of Activity stage: It is the last phase of this decision and management selects the most appropriate strategy. In this particular stage the analysis of the various strategies are required for providing an effective judgement. The judgmental skills and creative skills are required for making a rational decision during the crisis period. The theory is useful to recognise the rational decision which can facilitate the system. There are various ways to enhance the rationality of decisions by improving the effective use of scientific tools. The mechanism of the market is to be understood and operations associated with the decision making are to be enhanced.

The prospect theory  of Tversky and Kahneman incorporated the psychophysical principles to evaluate judgement and decision making. The aim is to analyse a point where a change is perceived. People are not known to the various processes that the brain can undertake but the brain involves activities of editing and evaluating (Ruggeri et al., 2020). The prospect theory predicts that the gains and losses are given importance according to their values. Prospect theory is also called the loss aversion theory. It states how the individual's choice the alternatives when there are risks of uncertainty. The theory was further refined by Amos Tversky and Daniel Kahneman which states how decisions are taken as compared to the utility theory. Tversky and Kahneman stated that losses can bear a great emotional effect on the individual choices. It comprehends exactly how people actually act while making decisions. The theory assumes that decision makers often risk disadvantage in a gain dominating domain. Similarly, decision makers are risk seeking in a deficit environment (Rossiter, 2019). The people look for uniqueness with association to prospects and tend to move away components. They are made on the basis of the external world. Decisions associate the internal conflict and it is difficult to promote choices. It addresses the choices when they are designed and assessed while making effective decisions.

The intuitive decision-making model has been one of the most popular models of decision making. This particular model has been developed by When the individuals are required to take any decisions in challenging circumstance there are higher levels of risks and uncertainty. The intuition in decision making helps to make effective decisions and work in adverse situations (Burton et al., 2020). Intuitions can drive the judgement of an individual through various emotions and cognition. People utilise intuition while making effective decisions and some indications are naturally felt by the different types of people (Hodgkinson and Sadler, 2018). Intuition plays a crucial role in the judgements and decisions we take in our life.

The intuition decision making model states that one can effectively make decisions much swiftly in new and complicated situations. It enhances the people to meet their goal and help to recognise dreams which cater to the fulfilment of personal values and goals. Persons who rely on their intuition helps to consider the right approach while making the decision. The rational decision could be taken by the individuals. But the intuitive decision can be a threat to some decisions as intuitions may not be wrong at a certain point of time. In a business scenario intuition is often referred to as the expertise gained from subconscious level. This type of intuition relies upon a wide scope of knowledge, experience, perceptions and skills which one gathers from the previous experiences (Decision Innovation, 2022). The knowledge and insights that an individual gathers will prove the effectiveness of intuition. There are certain problems associated with the intuition and decision -making process. Intuition decision making responds very swiftly to the inadequate and unreliable data based on the frameworks of prior experience. Generally, intuition believes the recognition of pattern and will try to solve the issues which were successful previously with the existing perceived pattern. 


The circumstances may alter during a crisis and result in a change. Because of the complexity, unpredictability, and dynamic character of crises, decision-making is necessary. We rely on predicted results for the vast majority of our decisions, which are value-based. The results are compared and the various inaccuracies are decreased once the preferred behaviour is incorporated. The decision-making process begins once the actual issue is located. the method of decision-making whereby the management makes the best choice based only on judgement and forecast. Every choice is made with the organization's best interests in mind. However, there are situations when choices might bring about the company's demise. Every organisation has its own unique way of making decisions, and every choice is made with the intention of advancing the business.

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