Discuss in brief different theories of Decision-Making.
OR
What are the principles of Decision-Making? How and why the employee participation in Decision-Making process should be introduced?
OR
Make out a case for employees participation in Decision-Making
OR
What are the principles of Decision-Making? How and why the employee participation in Decision-Making process should be introduced?
OR
Make out a case for employees participation in Decision-Making
Theories of Decision Making
The most common bases upon which decisions are made are, fact experience, intuition and authority. The decision itself is concerned with the achievement of an objective. Bridging the gap between the basis for the decision and the decision itself is the theory (or technique) used to arrive at the decision. Theories of decision making stem from the manner in which decisions are made.
Ernest Dale has suggested a comprehensive list of theories of decision making as follows
1. Traditional Economic Theory
2. Psychological Theory
3. Mathematical Theory.
1. Traditional Economic Theory Or Marginal Theory
The simplest theory of business decision making is that the decision makers try to maximize profits and that key consider all courses of action open to them in attempting to do. This is the theory held by traditional economists. Although it may be partially true that the decision makers generally have the effect of profits on mind, they may not always attempt to maximize profits. Marginal theory is based on the law of diminishing return. According to this law, with the additional units of inputs (labour and capital), the marginal contribution of each unit is at a decreasing rate. There comes a stage when the marginal return is zero. This is marginal point. A number of decisions in the area of production, sales, marketing, advertising, recruitment, etc are taken by the management on the basis of marginal theory.
2. Psychological Theory
This theory is designed to identify what actually goes on in the decision maker's mind when he makes a decision. Several factors leave an impact on the mind of the decision maker, such as nature, size and purpose of the organisation, manager's aspiration, attitude, habits, personally temperament, political learning's, social and organizational status, technological skill, domestic life, education, experience, level of satisfaction and so on Psychology of a manager has an important bearing on the quality of decisions he makes. As decision making is an intellectual process, these psychological factors cannot be avoided altogether.
One of the best-known psychological theories is Herbert Simon's theory, which explain that the decision maker attempts to satisfies rather maximize. In other words, a manager finds an answer that is good enough. What consequences the manager considers good enough, will depend on what has been achieved in the past.
3. Mathematical Decision Theory
It is not designed to show how decisions are actually made. Rather, it is designed to help the decision maker who is interested in maximizing profits in a given situation, to lay out the alternatives in such a way that he sees the risks and the consequences more clearly. With the development of operations research and computers for handling complex mathematical models, this approach is commonly used by large organizations where decision making problem is very complex. The linear programming, venture analysis, game theory, queuing theory, probability theory, etc are some of the examples of widely used Operations Research technique. Although these techniques provide a good deal of analysis, yet the rational and psychological aspects of decision making cannot be ignored totally. The attitude, intelligence and wisdom of the decision maker shall always have an important impact on the quality of decisions made by him