Management essay

5 Pages • Essays / Projects • Year: Pre-2021

Decision-making is not rational but about perceptions, hence managers should concentrate more on perceptions than rational decision-making. Perceptual processes are critical in understanding the relationship that exists between rationality and managerial decision-making. The model of perfect rationality exudes a process of explicitly reasoned arguments resulting in an optimal choice. Managerial roles however, are often faced with decisions that hold psychological, economic, political, moral and cognitive dimensions onset by subjectivity and intuition. Behavioural Economist Dan Ariely in his TED talk, ‘Our we control of are decisions?’ refutes the common assumption that we behave fundamentally in a rational way, rather with systematic patterns deriving from our perceptions. Managers, are hence, not expected to attain perfect rationality, but rather bounded rationality that encapsulates the perceptual processes of the decision maker. Decision making is a fundamental aspect of the managerial role. Managers are expected to allocate resources, elect employees and evaluate ventures to achieve objectives in a highly complex environment. Managerial decision making is typically divided into prescriptive approaches and descriptive approaches (Bazerman 1998). Utilising prescriptive models, managerial decisions are expected to derive and evaluate the groundwork’s of rationality. The goal of the rational decision maker is hence, to make optimal choices between specific and clearly defined alternatives (Simon, 1955). This is demonstrated in the Rational Decision Process in which the decision maker should have clear goals and a defined set of substitutes. These preferences are weighted in accordance to a specific known criteria allowing an outcome to be chosen from the best alternative. However, as examined in Ariely’s visionary illusion metaphor for, perfect rationality is difficult to understand, as managers do not perceive clear and concrete decisions. This can be exemplified using a business model that demonstrates the rise in the price of goods. Managers can decipher this rise as inflation without examing triggers of inflation such as high demand or low supply (Thomas, 2008). Hence, despite

This document is 10 Exchange Credits