Do people always act rationally? Rational decisions But what about intuition?

Most economic models assume that people are, on average, rational and that most people act in accordance with their preferences. However, there is a concept that corrects these assumptions and takes into account the fact that ideal rational decisions are often practically impossible due to the difficulty of controlling the problems that need to be solved. Bounded rationality is an idea that describes a person's bounded rationality in making decisions according to the individual's cognitive limitations and the time available to make decisions. This assumes that the decision maker will always make his decisions satisfactory rather than ideal, since people always look for a satisfactory solution instead of searching for the best solution within the available information.

Many modern studies in the field of humanities, economics, politics and related sciences indicate that most people are only partly rational, because... Man by nature does not follow all the logic of making rational decisions. Decision is the essence of the administrative process and its main tool for achieving goals. Its content reflects expectations of the future, which depend on the effectiveness of institutions in the first place, and on the effectiveness of managers in making decisions. In a world of globalization, intense competition and technological development, the solution must provide an effective basis for management to play its role in investing in technological developments to meet the environmental needs of the digital age.

A rational decision-making model presupposes the ability of the responsible person to clearly identify the problem and ensure that there is no conflict of goals. The decision maker usually has a clear order of preferences. These preferences are unambiguous and at the same time not regulated by binding restrictions in terms of timing and cost.

Although managers try to make the best decisions, their rational assumptions do not materialize in many realistic situations, because problems are often complex and ambiguous, goals are unclear, and there are too many alternatives. Money, emotions, and multiple human qualities also reduce the scope of possible optimal choices based on rational preferences. This is confirmed by Herbert Simon, one of the most famous scientists in the field of decision making and analysis of human behavior.

Simon divides humanitarian solutions into four main types, according to four criteria:

1 - purpose of the decision;

2 – interest in the solution;

3 - nature of the problem;

4 – corporate or personal.

The environment plays a key role in humanitarian decision-making. The environment is divided into three main types:

1. An environment of certainty.

2. Environment of the unknown.

3. Risk environment.

In connection with technological and cognitive progress, in the modern era, scientists note that when the decision-making environment was simple and its changes were slow, there was one mechanism for making managerial and other decisions. But nowadays the environment has become so complex that today it is even difficult to provide complete information to the person responsible for making management decisions. All this forces decision makers to make often far from rational management decisions.

Humanitarian solutions depend on a complex interplay of situational, psychological, intellectual, cultural, environmental and sensory factors interacting with each other. These reactions lead to far from rational decisions. Human emotions are also an important element in making various decisions. It is they who often determine these levels of their rationality.

Although many believe that intuition is an unscientific and irrational decision-making tool, the results of many studies conducted in this regard have confirmed the effectiveness of intuition in managerial decision making, i.e. the significance of human emotions when making managerial and other decisions. An intuitive decision, according to scientists, is a decision that arises from a person’s ability to simultaneously use information coming from the left and right hemispheres of the human brain, i.e. make a decision that arises from a mixture of facts and feelings.

During the evolution of human science, several theories have emerged that examine human behavior from the point of view of its rationality. The most important of these is rational choice theory. This theory is based on three main assumptions: methodological individualism, deductive approach and enhanced judgment. The most important area of application of this theory is the study of political science in the context of electoral decisions and the building of alliances among various political actors. That people are rational in their choices means that they make decisions based on a balanced calculation that takes into account losses and gains. A reasonable person always considers different options according to his priorities. He chooses the most important options based on his own irrational considerations.

Emotionality plays a very important role in how a person behaves. The reaction and his behavior, whether rational or not, equally distinguishes one person from another according to the emotions of each person. Modern psychology clearly recognizes that people behave unpredictably and cannot always be rational. This is also confirmed by ancient and modern philosophical theories and philosophers of different philosophical schools, ranging from ancient Greek philosophy to modern philosophy. Feelings and meaning are what makes a person human. And this substantiates the thesis that a person does not always act rationally.

Based on the above, it can be reasonably argued that behavioral economics as a whole is a logical analytical framework that has proven its fruitfulness in the study and management of a variety of economic phenomena. However, it is premature to state that we are dealing with a formed and established system of concepts and views. But it's a matter of time. Behavioral economics is not just a connection between economics and psychology, it is a new level of economic science that uses psychology as a tool.

Thanks to behavioral economics, neoclassical theory becomes even more in demand, as it is enriched by one of the most modern research approaches - behavioral economics. The award of the Nobel Prize to Richard Thaler means that behavioral economics is officially recognized as the future of economics. On its basis, leading economists will be able to create economic models that will allow economic agents, incl. and states, to more successfully predict and build on the basis of these forecasts their more rational behavior, taking into account the irrational component of the mechanism for making management decisions.

Bibliography

1. /Electronic resource/ http://www.open.edu/openlearn/money-anagement/money/economics/do- people-really-behave-rational-way. (access date 11/10/2017).

2. Electronic Journal of Sociology (2003) ISSN: 1198 3655 Human Rational Behavior and Economic Rationality, MilanZafirovski.

3. Herbert A. Simon / Electronic resource / http://www.cs.cmu.edu/simon/ (accessed November 11, 2017).

4. Theories of Decision-Making in Economics and Behavioral Science, Herbert A. Simon, The American Economic Review, Vol. 49, No. 3, 1959.pp. 253-283.

5. Anthony Downs, An Economic Theory of Democracy. / Electronic resource / http://wikisum.com/w/Downs:_An_economic_theory_of_democracy (accessed November 10, 2017).

6. Locke’s psychological theory of personal identity, JeffSpeaks, 2006.

Of particular importance is the problem of the effectiveness of the decision made. Any management decision makes sense only if it is effective.

The effectiveness of the solution depends on a number of objective and subjective factors.

In management theory, two of them are particularly highlighted:

1) quality of solution, which, in turn, is associated with the choice of the best alternative from those offered by the problem situation, as well as taking into account the capabilities of the decision makers;

2) degree of acceptance this decision by people. Thus, the effectiveness of the solution can be represented by the formula

ER = K x P,

where ER is the effectiveness of the solution;

K is the decision quality factor;

P - decision-making factor.

If one of the factors tends to a minimum, the effectiveness of the solution decreases.

A high degree of quality factor will be ensured if the solution meets requirements for management decisions.

They are as follows:

· target orientation: decisions must be aimed at achieving certain innovation goals;

· hierarchical subordination: the manager’s decisions must comply with the powers delegated to him;

· validity- decisions must have an objective justification for rationality;

· targeting decisions must be oriented in space and time, i.e. aimed at a specific performer and limited in time;

· security - decisions must provide the necessary resources and establish the sources of their receipt;

· directiveness- decisions must be binding and have a planned character.

In today's complex and rapidly changing conditions, most management decisions require a high degree of acceptance by people.

With a high probability, you can predict the effectiveness of the decision made by knowing principles, which underlie the procedure for making management decisions. The most common ones are principle of unity of command, principle of unanimity, principle of majority and principle of consensus .

Let's look at each of them:

Principle of unity of command. The decision is made individually. It can be effective if it is assessed as high quality (high “K”). But often unilateral decisions are made by managers with an authoritarian style of behavior who prefer to command and order. Therefore, when implementing a decision, tension arises, and interpersonal relationships are characterized by increased conflict.

Principle of unanimity. This is unconditional support for the alternative being put forward. Unanimity occurs in the absence of a “coalition” or opposing groups. For an organization, unanimity is a rather dangerous symptom, indicating a weakening of the democratic style of thinking.

Majority principle. It comes into play when different opinions compete in the process of making a decision. In this regard, when making decisions, they resort to voting. Often, a simple majority is sufficient to make a decision; sometimes, on some fundamental issues, a 2/3 norm is approved.

It cannot be said that the use of this principle ensures the adoption of a high-quality decision. After all, there is no guarantee that the majority defends the better alternative. History knows many cases when the bold progressive ideas of individual people were not taken seriously at first.

Consensus principle.

Consensus- this is the coordination of all controversial issues and different opinions in the process of developing solutions. It is achieved through mutual discussions and consultations, as well as through the use of various techniques for rationalizing the alternatives put forward. For this purpose, a whole arsenal of special techniques is used: “brainstorming”, “synectics”, “interviews”, “group work”, etc.

Effective decision making is one of the important conditions for the effective existence and development of an organization. Today there is a scientific discipline - decision-making theory, which offers an arsenal of modern methods and technologies for developing management decisions.

Currently, the use of modern technologies for making management decisions is vital for a manager. In the intense competitive struggle, those organizations survive and achieve success in which management has the ability to make effective decisions, using the additional opportunities that modern technologies for making management decisions provide.

Management decision- this is the choice that a manager must make in order to fulfill the responsibilities associated with his position (the choice of an alternative made by the manager within the framework of his official powers and competence and aimed at achieving the goals of the organization). Decision making is the basis of management. Responsibility for making important management decisions is a heavy moral burden, which is especially evident at the highest levels of management.

Solution is a choice of alternative. Every day we make hundreds of decisions without even thinking about how we do it. The fact is that the price of such decisions is, as a rule, low, and this price is determined by the subject who made them. Of course, there are a number of problems relating to relationships between people, health, and the family budget, the unsuccessful solution of which can lead to far-reaching consequences, but this is the exception rather than the rule.
However, in management, decision making is a more systematic process than in private life.

The main differences between management decisions and decisions in private life.

1. Goals. The subject of management (whether it is an individual or a group) makes a decision not based on his own needs, but in order to solve the problems of a specific organization.

2. Consequences. An individual's private choices affect his own life and may affect the few people close to him.

A manager, especially a high-ranking one, chooses the course of action not only for himself, but also for the organization as a whole and its employees, and his decisions can significantly affect the lives of many people. If an organization is large and influential, the decisions of its leaders can seriously affect the socio-economic situation of entire regions. For example, a decision to close an unprofitable company operation can significantly increase the unemployment rate.

3. Division of labor. If in private life a person, when making a decision, as a rule, carries it out himself, then in an organization there is a certain division of labor: some workers (managers) are busy solving emerging problems and making decisions, while others (performers) are busy implementing decisions already made.

4. Professionalism. In private life, each person makes his own decisions based on his intelligence and experience. In managing an organization, decision making is a much more complex, responsible and formalized process that requires professional training. Not every employee of the organization, but only those with certain professional knowledge and skills, is given the authority to independently make certain decisions.

Decision making is preceded by several stages:

the emergence of problems on which decisions need to be made;

development and formulation of alternatives;

selection of the optimal alternative from their sets;

approval (making) of a decision;

organization of work to implement the solution - feedback

Classification of management decisions

Depending on the basis underlying the decision-making, there are:

intuitive solutions;
judgment-based decisions;
rational decisions.

Intuitive solutions. A purely intuitive decision is a choice made only on the basis of a feeling that it is correct. The decision maker does not consciously weigh the pros and cons of each alternative and does not even need to understand the situation. It's just a person making a choice. What we call insight or “sixth sense” are intuitive decisions. Management expert Peter Schoederbeck points out that “while increased information about an issue can greatly help middle managers make decisions, those at the top still have to rely on intuitive judgments. Moreover, computers allow management to pay more attention to data without replacing time-honored managerial intuitive know-how.”

Decisions based on judgment. Such decisions sometimes seem intuitive because their logic is not obvious. A judgment-based decision is a choice driven by knowledge or experience. A person uses knowledge of what has happened in similar situations before to predict the outcome of alternative choices in an existing situation. Using common sense, he chooses an alternative that has brought success in the past. However, common sense is rare among people, so this method of decision-making is also not very reliable, although it is captivating with its speed and cheapness.

When, for example, you are making a choice between studying a management degree program or an accounting degree program, you are likely making a decision based on judgment based on your experience with the introductory courses in each subject.

Judgment as a basis for management decision is useful because many situations in organizations tend to be subject to frequent conquest. In this case, the previously made decision can work again no worse than before, which is the main advantage of programmed decisions.

Another weakness is that the judgment cannot be related to a situation that has not previously occurred, and therefore there is simply no experience in solving it. In addition, with this approach, the manager strives to act primarily in those directions that are familiar to him, as a result of which he risks missing out on good results in another area, consciously or unconsciously refusing to invade it.

Rational solutions based on methods of economic analysis, justification and optimization.

Depending on the personal characteristics of the manager making the decision, it is customary to distinguish:

balanced decisions;
And impulsive decisions;
inert solutions;
risky decisions;
careful decisions.

Balanced Solutions accepted by managers who are attentive and critical to their actions, put forward hypotheses and their testing. They usually have an initial idea formulated before making a decision.

Impulsive decisions, the authors of which easily generate a wide variety of ideas in unlimited quantities, but are not able to properly test, clarify, and evaluate them. Therefore, decisions turn out to be insufficiently substantiated and reliable; they are made “at once”, “in jerks”.

Inert solutions become the result of a careful search. In them, on the contrary, control and clarifying actions prevail over the generation of ideas, so it is difficult to detect originality, brilliance, and innovation in such decisions.

Risky decisions They differ from impulsive ones in that their authors do not need to carefully substantiate their hypotheses and, if they are confident in themselves, may not be afraid of any dangers.

Careful decisions are characterized by the manager’s thorough assessment of all options and a hypercritical approach to business. They are even less distinguished by novelty and originality than inert ones.

Types of decisions that depend on the personal characteristics of the manager are characteristic mainly in the process of operational personnel management.

For strategic and tactical management in any subsystem of the management system, rational decisions are made based on methods of economic analysis, justification and optimization.

Depending on the degree of preliminary formalization, there are:

programmed decisions;
unprogrammed decisions.

Programmed solution is the result of implementing a certain sequence of steps or actions. Typically, the number of possible alternatives is limited and choices must be made within the directions given by the organization.

For example, the head of the purchasing department of any production association, when drawing up a schedule for the purchase of raw materials and materials, may proceed from a formula that requires a certain ratio between the planned production volume and the number of raw materials and materials for the production of a unit of finished products. If the budget stipulates that the production of a unit of production will cost2 kg of raw materials and supplies, then the decision is made automatically - the planned production volume is 1000 pieces, therefore it is necessary to purchase 2,000 kg of raw materials.

Likewise, if the finance manager were required to invest his excess cash in certificates of deposit, municipal bonds, or common stock, whichever would provide the greatest return on investment at the time, the choice would be determined by the results of a simple calculation of each option and the determination of the profitable.

Programming can be considered an important aid in making effective management decisions. By defining what the decision should be, management reduces the likelihood of error. This also saves time because subordinates do not have to develop a new correct procedure every time a situation arises.

It is not surprising that management often programs solutions for situations that recur with some regularity.

It is very important for a manager to have confidence that the decision-making procedure is, in fact, correct and desirable. Obviously, if a programmed procedure becomes incorrect and undesirable, decisions made through it will be ineffective, and management will lose the respect of its employees and those outside the organization who are affected by the decisions made. Moreover, it is highly desirable to communicate the rationale for a programmed decision-making methodology to those who use this methodology, rather than simply offering it for use. Failure to answer questions that begin with "why" in connection with a decision-making procedure often creates tension and resentment among the people who must apply the procedure. Effective information sharing improves decision-making efficiency.

Non-programmed solutions. Decisions of this type are required in situations that are somewhat new, internally unstructured, or involve unknown factors. Since it is impossible to draw up a specific sequence of necessary steps in advance, the manager must develop a decision-making procedure. The following types of solutions can be classified as unprogrammed:

what should be the goals of the organization;
how to improve products;
how to improve the structure of the management unit;
How to increase the motivation of subordinates.

In each of these situations (as is most often the case with unprogrammed solutions), the true cause of the problem could be any of the factors. At the same time, the manager has many options to choose from.

In practice, few management decisions turn out to be programmed or unprogrammed in their pure form.

Most likely, they are extreme reflections of some spectrum in the case of both everyday and fundamental decisions. Almost all decisions end up somewhere between the extremes.

Requirements for solutions

minimum number of adjustments;
balance of rights and responsibilities of the manager making the decision - responsibility must be equal to his powers;
unity of command - the decision (or order) must come from the immediate supervisor. In practice, this means that a superior manager should not give orders “over the head” of a subordinate manager;
strict liability - management decisions should not contradict each other;
validity - a management decision must be made on the basis of reliable information about the condition of the object, taking into account its development trends;
concreteness;
authority - a management decision must be made by a body or person who has the right to make it;
timeliness - a management decision must be timely, because a delay in a decision sharply reduces the effectiveness of management.

Conditions for a quality solution

application of scientific management approaches to the development of management solutions;
studying the influence of economic laws on the effectiveness of management decisions;
providing the decision maker with quality information characterizing the parameters of the “output”, “input”, “external environment” and “process” of the solution development system;
application of methods of functional cost analysis, forecasting, modeling and economic justification for each decision;
structuring the problem and building a tree of goals;
ensuring comparability (comparability) of solution options;
ensuring multiple solutions;
legal validity of the decision;
automation of the process of collecting and processing information, the process of developing and implementing solutions;
development and operation of a system of responsibility and motivation for high-quality and effective solutions;
the presence of a mechanism for implementing the solution.

A solution is considered effective if:

1. It comes from realistic goals.

2. To implement it, there is the necessary time and the necessary resources.

3. It can be implemented in the specific conditions of the organization.

4.Contingency and emergency situations are provided for.

5. It does not provoke conflict situations and stress.

6.Changes in the business and background environment are anticipated.

7. It makes it possible to monitor execution.

One of the important factors influencing the quality of management decisions is the number of management levels in the organization, the increase of which leads to distortion of information when preparing a decision, distortion of orders coming from the subject of management, and increases the sluggishness of the organization. The same factor contributes to the delay of information received by the subject of the decision. This determines the constant desire to reduce the number of management levels in the organization.

A serious problem associated with the effectiveness of management decisions is also the problem of implementing these decisions. Up to a third of all management decisions do not achieve their goals due to low performance culture. In our and foreign countries, sociologists belonging to a variety of schools pay close attention to improving performance discipline, including ordinary employees in the development of solutions, motivating such activities, cultivating “trademark patriotism,” and stimulating self-government.

Levels of Decision Making

The differences that exist in the types of decisions and the differences in the difficulty of the problems to be solved determine the level of decision making.

M. Woodcock and D. Francis identify four levels of decision making, each of which requires certain management skills: routine, selective, adaptive, innovative.

The first level is routine. Decisions made at this level are ordinary routine decisions. As a rule, the manager has a specific program on how to recognize the situation and what decision to make. In this case, the manager behaves like a computer. Its function is to “feel” and identify the situation, and then take responsibility for initiating certain actions. A leader must have instinct, correctly interpret existing indications of a particular situation, act logically, make the right decisions, show determination, and ensure effective actions at the right time. This level does not require a creative approach, since all actions and procedures are prescribed in advance.

The second level is selective. This level already requires initiative and freedom of action, but only within certain limits. The manager is faced with a range of possible solutions, and his task is to evaluate the merits of such solutions and to select from a number of well-developed alternative courses of action those that best suit the given problem. Success and effectiveness depend on the manager's ability to choose a course of action.

The third level is adaptation. The manager must come up with a solution that may be completely new. The manager has a certain set of proven possibilities and some new ideas. Only personal initiative and the ability to make a breakthrough into the unknown can determine the success of a manager.

The fourth level, the most difficult, is innovative. The most complex problems are solved at this level. A completely new approach is required on the part of the manager. This may involve finding a solution to a problem that was previously poorly understood or that requires new ideas and methods to solve. A leader must be able to find ways to understand completely unexpected and unpredictable problems, develop the skill and ability to think in new ways. The most modern and difficult problems may require the creation of a new branch of science or technology to be solved.

Optimization of management decisions

The most common methods for optimizing management decisions are:

math modeling;
method of expert assessments;
brainstorming method (brain attack);
game theory.

Math modeling used in cases where a management decision is made on the basis of extensive digital information that can be easily formalized. The widespread use of mathematical models makes it possible to quantitatively characterize the problem and find the optimal solution.

The main stages of optimizing a management decision using mathematical methods are:

Formulation of the problem.

The choice of efficiency criterion, which must be expressed unambiguously, for example, by a certain number, and reflect the degree of compliance of the results of solving the set goal.

Analysis and measurement of variables (factors) influencing the value of the effectiveness criterion.

Construction of a mathematical model.

Mathematical solution of the model.

Logical and experimental verification of the model and the solution obtained with its help.

Expert assessment methods are used in cases where the problem completely or partially cannot be formalized and cannot be solved by mathematical methods.

The method of expert assessments is a study of complex special issues at the stage of developing a management decision by persons with special knowledge and experience in order to obtain conclusions, opinions, recommendations and assessments. The expert opinion is drawn up in the form of a document that records the progress of the study and its results. The introduction indicates: who, where, when and in connection with what organizes and conducts the examination. Next, the object of examination is recorded, the methods used for the study, and the data obtained as a result of the study are indicated. The final part contains conclusions, recommendations and practical measures proposed by experts.

The most effective use of the method of expert assessments is when analyzing complex processes that have mainly qualitative characteristics, when forecasting trends in the development of the trading system, and when assessing alternative solutions.

Brainstorming method(brainstorming) is used in cases where there is a minimum of information about the problem being solved and a short deadline has been set for solving it. Then specialists related to this problem are invited, they are invited to participate in a forced discussion of its solution. In this case, the following rules are strictly observed:

everyone speaks out in turn;

they speak only when they can offer a new idea;

statements are not criticized or condemned;

all offers are recorded.

Usually this method allows you to quickly and correctly solve the problem that has arisen.

A variation of the brainstorming method is jury opinion. The essence of this method is that specialists from various fields of activity are involved in discussing the problem and interacting with each other. For example, managers of the company's production, commercial and financial departments are involved in the decision to release a new product. The use of this method helps generate new ideas and alternatives.

One of the methods for optimizing management decisions in conditions of market competition is the use of methods used in game theory, the essence of which is to model the impact of a decision on competitors. For example, if, using game theory, the management of a trading firm concludes that if competitors raise prices on goods, then it may be advisable to abandon the decision to increase prices in order to avoid being put at a competitive disadvantage.

Methods for optimizing management decisions can complement each other and be used comprehensively when developing important management decisions.

The choice of methods for optimizing management decisions largely depends on the information support of management.

Many Japanese companies have used the Ringisei decision-making system to one degree or another, providing in-depth elaboration and coordination of decisions.

The classic “ringisei” procedure provided for repeated approval of the prepared decision at several levels of management, starting with ordinary employees (one of them is entrusted with drawing up a preliminary draft decision) and ending with senior managers who approve the decision that has passed all stages of approval. Coordination includes consultations at the level of ordinary employees of various departments (they are carried out by the employee responsible for preparing the preliminary draft decision), at the level of heads of departments and other divisions (carried out in the form of circulation of the draft decision among all departments related to this issue), and then more high-ranking managers - deputies and heads of departments or departments. By the end of circulation, the draft document turns out to be endorsed with the personal seals of dozens of superiors of various ranks. If disagreement arises during the preparation of a decision, consultative meetings of managers at the appropriate level are held at one level or another, during which an agreed position is developed. This practice of preparing decisions is quite complex and time-consuming, but most Japanese corporations go to such a slowdown in decision-making, counting on the fact that the “ringisei” procedure, which ensures coordination of actions at the decision-making stage, facilitates the coordination of their subsequent implementation.

The system has unconditional advantages. However, it is not without some disadvantages. It is believed that the procedure should ensure an influx of new ideas and freedom of opinion when discussing decisions. But this doesn't always happen. Sometimes, in conditions of a strict hierarchy and respect for superiors, such a process comes down to attempts by subordinates to predict the opinion of managers rather than to promoting their independent point of view. In this form, the “ringisei” system often turned into a complex and not always useful mechanism, taking a lot of time from managers and employees of different ranks to coordinate decisions.

Therefore, there is a gradual reduction in the sphere of influence of the Ringisei decision-making method. This is due to a number of reasons, including the widespread use of planning and budget development methods in Japanese firms (due to this, there is no need to make decisions on many issues using the traditional method). Considering that long-term planning is used, according to available data, by 83% of Japanese firms, the scale of such changes is quite noticeable. 63% of Japanese firms have increased individual decision-making power, which again has led to a reduction in the scope of ringisei. By 1974, 4% of Japanese companies had completely eliminated the ringisei system.

As we said at the end of the last lesson, making a decision is only half the battle. The second half is to evaluate how correct, faithful and effective it was. This is important for the reason that the assessment allows you to understand how competent the actions taken were, whether they will lead to success in the future, and in general, whether it is worth counting on them. Evaluation of decisions made is a kind of litmus test that tests their effectiveness. However, it is very important to understand that ordinary decisions in life and management decisions are evaluated using different algorithms.

Evaluating Everyday Decisions

To begin with, let us repeat a little: if you are faced with the need to make some difficult decision, the consequences of which worry you, first of all you should think through the pros and cons several times, evaluate the situation and possible options for resolving it. making a decision is the first step towards its effectiveness.

The final product of the analysis of the decision made will always be the result. Based on it, it will be possible to judge whether the goal was achieved, what resources were used to achieve it, how much effort and time was spent, what happened in the end, and whether the game was worth the candle.

So, if the decision made is associated with any quantifiable quantities, its effectiveness is quite amenable to calculation in relative or absolute units. For example, if you decide to reach a new level of income, you can evaluate the effectiveness of your decision after a month or six months. If you decide to launch a new advertisement for your product, you can understand how effective this decision was by establishing the increase in customers, the increase in the percentage of sales and net profit.

In the case when the decision is associated with uncountable quantities, its evaluation occurs differently. You need to understand whether you have achieved the initially set result. For example, having set yourself the task of increasing your personal productivity and starting to get more done, you decided. You can sum up the results in a week by checking the boxes next to completed tasks on your list.

Decisions made in any other area of life are assessed in a similar way. The scheme is extremely simple: the goal is either achieved or not. If it is achieved, you did everything right, but if not, you need to change something. In addition, efficiency assessment can be carried out with an eye to the resources expended: the less effort, time, money and other funds you spent on implementing your solution, the more effective it is. It's simple.

As we see, in ordinary everyday life it is quite easy to analyze decisions made. But there is another category of decisions - management ones, and they are much more difficult to analyze. Entire books and manuals are written on this topic, and, unfortunately, it will not be possible to cover all the details in one lesson. However, it is quite possible to point out the basics of this process. This is what we will do.

Fundamentals of assessing management decisions

The adoption of any management decision can be called an intermediate stage between the management decision and the management impact. This in turn suggests that the effectiveness of such a solution is manifested in the totality of the effectiveness of its development and implementation.

In total, there are more than six dozen various private indicators of organizational performance. These include working capital turnover, profitability, return on investment, the ratio of growth rates of labor productivity and average wages, etc.

Assessing the effectiveness of management decisions involves using the concept of cumulative economic effect, because The results obtained necessarily include the labor contribution of people.

It should also be said that it is very important for organizations to satisfy customer requirements and at the same time improve the economic performance of their activities. Based on this, when assessing the effectiveness of decisions, it becomes necessary to take into account two aspects of effectiveness - social and economic.

The algorithm for assessing the effectiveness of management decisions can be illustrated by taking a trading organization as an example. So, in order to understand whether the decision was effective or not, it is necessary to keep separate records of income and expenses regarding different product groups. Considering that this is very difficult to do in practice, the use of so-called specific quality indicators is common in the analysis process. Here these are profit per 1 million rubles of trade turnover and distribution costs per 1 million inventory.

The effectiveness of management decisions in trade organizations is expressed collectively in quantitative form - this is an increase in turnover volumes, an increase in the speed of product turnover and a decrease in the amount of commodity reserves.

If you need to understand the final financial and economic result of the implementation of management decisions, you should establish how much the income of a particular organization increases and how much its expenses are reduced.

You can determine the economic efficiency of a decision that influenced the growth of trade turnover and increased profits using the formula:

Ef P*T P * (Tf - Tpl), where:

Ef - indicator of economic efficiency
P - profit indicator per 1 million rubles of trade turnover
T - indicator of increase in trade turnover
TF - an indicator of actual trade turnover observed after the implementation of a management decision
Tpl - indicator of planned turnover (or turnover for a comparable period before the implementation of a management decision)

In this example, economic efficiency reflects a reduction in distribution costs (commercial costs, selling costs) that fall on the balance of goods. Hence the increase in profit figures. The efficiency here is determined by the formula:

Ef =IO*Z IO*(Z2 - Z1), where:

Ef - an indicator of the economic efficiency of a specific management decision
IO - an indicator of the volume of distribution costs per 1 million rubles of inventory
Z - indicator of the magnitude of changes (decrease) in inventory
31 - indicator of the volume of inventory before the implementation of a management decision
32 - indicator of the volume of inventory after the implementation of a management decision

In our case, the economic efficiency of the management decision was also reflected in the increase in the rate of goods turnover. Its indicator can be calculated using the formula:

Ef Io*Ob Io (Ob f - Ob pl), where:

Ef - an indicator of the economic efficiency of a management decision
Io - indicator of the simultaneous volume of distribution costs
Ob - an indicator of increasing the rate of turnover of goods
About pl - indicator of goods turnover before making a management decision
About f - indicator of goods turnover after making a management decision

In addition to everything, to analyze the effectiveness of management decisions, it is customary to use several specialized methods that simplify the procedure and lead to more accurate results.

Methods for assessing management decisions

In the process of assessing the effectiveness of management decisions, seven main methods are used:

Index method. It is used to analyze the most complex phenomena with elements that cannot be measured. Indices here play the role of relative indicators. They help evaluate how planned tasks are being accomplished and determine the dynamics of various processes and phenomena. The index method is designed to help decompose the general indicator into factors of relative and absolute deviations.
Balance method. Its essence lies in the fact that interrelated indicators of the organization’s performance are compared. The goal is to determine the influence of individual factors and find reserves for increasing the company's efficiency. The relationship between individual indicators is represented by the equality of the results obtained after certain comparisons.
Elimination method. It generalizes the first two methods and offers the ability to determine the impact of any one factor on the overall performance of the company. It is assumed that all other factors functioned in the same environment - according to plan.
Graphic method. It is a way to visually present the work of an organization, determine a set of indicators and formalize the results of analytical activities.
Comparison method. Offers the opportunity to evaluate the company’s performance, identify deviations of actual indicators from basic values, establish their causes and search for reserves for subsequent improvement of activities.
Functional and cost analysis. It can be called a systematic research method, used based on the purpose of the object of study. Its task is to increase the beneficial effect (return) of total costs over the life cycle of an object. A distinctive feature is that the method allows you to establish the feasibility of a number of functions that will be performed by the designed object in a specific environment, as well as check the need for some functions of an object that already exists.
Economic and mathematical methods. They are used when it is necessary to select optimal options that determine the specifics of management decisions in current or expected economic conditions. There are many problems that can be solved by economic and mathematical methods. Among them are establishing the best range of manufactured products, assessing the production plan, comparative analysis of the economic efficiency of using resources, optimizing the production program and others.

How effective the organization's work will be is greatly influenced by management decisions. This is the reason why it is important to master as much as possible the management apparatus, the theory and practice of developing and implementing solutions. This means that you need to have the skill of choosing the best alternative among several options.

Any management decisions are conditioned by the reliability and completeness of the available data. Therefore, they can be accepted both under conditions of certainty and under conditions of uncertainty.

Management decision making as a process is a cyclical sequence of actions of a responsible person to resolve current problems. These actions consist of analyzing the situation, developing possible solutions, choosing and implementing the best one.

Practice shows that decision-making at any level is subject to errors. This is influenced by many reasons, t.c. economic development includes a large number of different situations that need to be resolved.

A special place among the reasons why management decisions turn out to be ineffective is non-compliance or simple ignorance of the technology for their generation and subsequent implementation. And for this it is customary to use theoretical information, methods and techniques that we talked about in previous lessons.

Everything said above, of course, describes only the basic prerequisites for assessing the effectiveness of management decisions. To apply them correctly in practice, you must either have the appropriate education or immerse yourself in the study of specialized literature, because there are a huge number of subtleties, nuances, techniques and purely technical data that need to be studied, absorbed and mastered. This lesson can serve as a starting point for further delving into the specifics of assessing the effectiveness of management decisions.

In conclusion of our course, I would like to highlight one more topic, knowledge in which is simply necessary for making the right decisions in life, education and at work. This is a topic in the psychology of decision making. And we will consider it from the position of Daniel Kahneman, a psychologist and one of the founders of behavioral finance and psychological economic theory. He combines cognitive science and economics in his explanations of people's irrational risk-taking behavior in managing their behavior and making decisions. Kahneman's ideas will provide you with significant support in improving your effectiveness.

Want to test your knowledge?

If you want to test your theoretical knowledge on the topic of the course and understand how suitable it is for you, you can take our test. For each question, only 1 option can be correct. After you select one of the options, the system automatically moves on to the next question.

We constantly have to make choices and decisions. Sometimes these problems are less important - “Should I take an umbrella to work”, sometimes more important - “Should I invest $100 million in a joint venture?” Usually people in such cases say: “I have a PROBLEM. I don't know what to do in this situation." But each problem is a special form of the problem, the solution of which is influenced by many factors.

There are a large number of different types of decisions - from very specific to overly vague, from forced to optional. There is often more than one solution that can be considered correct. Additionally, there is a difference between a correct and an effective solution. And the choice remains - what decision to make and how to implement it.

Ways to find an expedient and effective solution

As a rule, the bulk of decisions are made based on the experience and knowledge of the manager. But in order to make decisions in a constantly changing external environment, experience alone is not enough. And in a situation with new circumstances, it is necessary to master the technologies for making effective decisions.

In our country, the majority of small and medium-sized business entrepreneurs work the old fashioned way, relying on the experience of previous years. Of course, many have been in business for five to ten years, and new experience has been acquired over time, but the higher the level of business, sales volumes, and the size of the market segment served, the higher the cost of each management mistake.

What is the solution

Classic decision making process:

Define the goal.
Collect the necessary information.
Develop options for possible solutions.
Make a decision by choosing the best option.
Implement the solution, evaluating its effectiveness along the way.

A decision is the choice of the optimal option from available alternatives. , which is based on a choice between “right” and “wrong”.

Most books that describe the decision-making process say that you need to start by looking for facts. But experienced leaders know that they need to start with opinions. Because a decision is, first of all, a judgment (opinion). And the basis of the right decision is a correct understanding of the situation, which consists of different opinions.

So, the starting point in decision making is unverified opinions. What to do next? Opinions should not be doubted, they should be tested. It will then be possible to discover which of these opinions are quite reasonable and worthy of further consideration, and which should be discarded as having not stood the test of reality. By the way, competent managers stimulate the process of the birth of opinions in the team; they strive to ensure that employees who expressed their opinions take responsibility for checking them.

Remember that traditionally most people take as their starting point their vision of things as the only possible one. An experienced manager knows that any expressed opinion contains a rational grain and must be listened to with due attention. But before making a final decision, it is advisable to organize a debate and exchange of opinions.

We need not just the right solution, but an effective solution

Let's say we have a problem - we need to improve some quality of a certain product. Using already known methods, we can obtain an improvement in the “required quality” - but at the same time, another “important quality” will unacceptably deteriorate. How to find an answer in which both “necessary” and “important” will be combined without loss?

Typically, such a problem is always solved by the method of compromise (optimization, finding a golden mean): we partially deteriorate the “necessary”, but then the “important” deteriorates less. The decision will be correct, but ineffective.

But we should always strive to find not just a solution, but an effective solution.

Effective solutions are almost always characterized by simplicity at any level: from work process to general management, in such cases bewilderment is often caused - “Why didn’t they think of this before?”

Basic requirements for an effective solution

In order to be effective, that is, to achieve the set goals, the solution must satisfy a number of requirements:

the decision must be justified;
the solution must be real, that is, it can be implemented in practice with a reasonable amount of resources and time;
it is desirable that a complex solution can be consistently decomposed into simple ones;
the decision must be timely, that is, made at the moment when its implementation is especially appropriate;
the solution must be flexible: take into account the possibility of changing the algorithm when conditions change;
the solution must bring maximum benefit;
the decision must provide for control over its implementation.

Algorithm for making an effective decision

So, a problem has been discovered at the enterprise. A problem is understood as a critical discrepancy between the desired and actual state. There are two types of problems:

when the set goals are not achieved;
when there is a potential possibility (for example, of an event).

Let's consider an algorithm for effectively solving the problem that has arisen. This algorithm was developed by American researchers L. Plunkett and G. Hale, and is based on generalizing the experience of making management decisions of a significant number of successful enterprises. It is as follows:

Determining the goal and direction of solving the problem

At this stage, a goal is set that meets all the necessary requirements: it is clear and understandable to the performers, it is measured by quantitative methods, it has a deadline for implementation and is consistent with the global goal of the entire enterprise.

Setting decision criteria

It is desirable that the selected indicators cover as fully as possible the best conditions for achieving the set goal.

Setting restrictions

Constraints (usually numbers of maximum costs and time, minimum characteristics, legality, ethical considerations, intense competition) determine the range of choice in decision making.

Development of alternatives

Alternatives are key components of an effective solution. The effectiveness of a decision is largely determined by the number of alternative options that will be considered. It is advisable to identify all possible options, including the possibility of inaction. The absence of alternative options indicates either a lack of awareness or a lack of time to check this decision. Both of these increase the likelihood of error in decision making. Remember that alternatives must:

mutually exclusive;
assume maximum differences in selected criteria and restrictions;
be equally likely.

Comparison of alternatives

To successfully select an alternative, it is necessary that all decision options be brought into a comparable form according to various factors: for example, time, quality of the object, expectation of material benefit, attraction of additional information. In this case, the comparability of alternative options is subject to a number of rules:

the number of alternative options must be at least three;
the most recent option should be taken as the base decision option;
alternative options should reflect the full range of possibilities.

Risk assessment

The effectiveness of choice is influenced not only by the assessment of the alternative according to the main criteria, but also by the acceptable degree of risk. The term "risk" is not used in the sense of danger, but refers to the level of certainty with which an outcome can be predicted. Risk assessment is an assessment of the outcome of an event in terms of the adverse consequences of that event for those involved.

Risk is divided into types: economic, social, political, environmental, financial, etc. From the point of view of the nature of risk manifestation, systematic and random risks are distinguished. Systematic risk is usually associated with the professional activities of the participants and is characterized by a high probability of occurrence. A random risk is caused by a unique set of circumstances and is much less likely to happen, but the consequences of a random risk can be much more dangerous. The main risk parameters are:

the extent of possible damage arising from the event;
probability of occurrence of the event;
possible expenses associated with eliminating the consequences of the event.

Selecting an Alternative

When choosing the best alternative, you should adhere to the following rules:

the alternative that best matches the selected criteria and restrictions is selected;
the alternative that has the optimal balance between profitability and risk is selected;
the alternative that has received the fullest possible agreement from experts is selected.

The key property of an effective solution is the mandatory presence of alternatives that ensure the expediency and awareness of their free choice.

Let's assume that everything is ready to make a decision. All conditions are thought out, alternatives are explored, benefits are weighed. The choice of course of action seems obvious here, since it is at this stage that the decision is almost ready. But, at the same time, it is at this stage that most decisions are rejected. Suddenly it turns out that it may be unpleasant, unpopular or difficult. And it becomes obvious that the decision requires not only analysis, but also great courage. But the fact that the right decision is associated with some negative aspects should not be a reason to abandon it.

What determines the quality of a solution?

The quality of the solution largely determines the final result and the effectiveness of completing the task. The quality of the solution depends on a number of factors:

quality of source information (its reliability, sufficiency, security from errors, form of presentation);
the nature of the decision being made - optimal or rational;
timeliness of decisions made;
qualifications of personnel involved in developing, making decisions and organizing their execution.

Action and inaction (refusal to act)

Often you have to make a decision only because inaction can only make the situation worse. The same applies to favorable opportunities. An opportunity appears only for a limited time, and if it is not used in time, it will disappear. Is it necessary to act in such cases, since action can lead to radical changes? In such cases, experts advise conducting a comparative analysis of the risk associated with action and the risk of inaction. There is no formula for the correct solution here. But there are rules that facilitate decision-making in specific cases:

proceed if, taking all the circumstances into account, the benefits would significantly outweigh the costs and risks;
You can act or not act, but you cannot shirk and you cannot limit yourself to half-hearted decisions.

An experienced worker knows these rules and will never take half measures or take “half actions.” This is almost always a losing proposition.

But what about intuition?

Decisions can be not only justified, made on the basis of information analysis and multivariate calculation, but also intuitive. This usually occurs when the factors to be considered are completely new and difficult to analyze because sufficiently conclusive information cannot be obtained. Another case is when decisions are made in rapidly changing circumstances or under acute time pressure. Faced with this kind of uncertainty, an entrepreneur has two options:

try to obtain additional information;
make a decision in accordance with logical conclusions based on past experience and knowledge, trust your intuition.

There are times when an intuitive or instinctive decision turns out to be more correct than a decision made through long deliberation. In extreme situations, when you need to react as quickly as possible, the subconscious is able to offer the best way out. Trust your intuition and subconscious, but remember that although they save time and effort, they still contain a certain likelihood of errors.

Using the command

The order in which decisions are made may vary depending on the importance of the problem, the style followed by the leader, the specific situation, etc. The manager can:

Make a decision alone, based on the information available to him and based on personal experience.
Obtain the necessary information from subordinates and make an independent decision based on this information.
Conduct individual consultations with some subordinates, but do not require them to formulate a common opinion.
Discuss a problem with a group of subordinates, jointly develop and evaluate alternative solutions to the problem, and make a decision that receives the most support.
Delegate the rights to solve a problem to a working group that is assigned a task and defines limitations. The leader does not take part in the work of this group, agreeing in advance to support the collectively reached decision.

The “Six Thinking Hats” method (Edward de Bono method) for making decisions and assessing situations

Participants in the discussion alternately put on six different-colored hats and try to all think in unison:

wearing a white hat, collect additional information;
wearing a red hat, describe their emotional attitude;
wearing a yellow optimist hat, they identify positive aspects;
putting on the black hat of a pessimist, they reveal the negative aspects;
wearing a green hat, assess growth prospects;
Wearing a blue hat, they discuss the process of implementing a new idea.

For the survival and successful operation of a company in a new, rapidly changing economy, the manager’s ability to delegate authority is of great importance. After all, the amount of information that needs to be processed to develop effective management decisions is often too large. The more specific the problem, the less often the manager has to deal with it, the less competent his solution may be. Accordingly, a dilemma arises: either spend a lot of time (yours and your subordinates) getting to grips with the problem (and this will reduce the effectiveness of the decision being made), or make a quick decision (and this is fraught with a high probability of error). But no manager knows a specific situation better than the performer responsible for the corresponding area of work. Therefore, to make specific decisions, it is advisable to involve those employees who are familiar with the problem at hand and will be able to give certain recommendations in solving it.

It has been found that group decisions are very effective, provided that the working group is small in composition and the participants have the opportunity to discuss possible solutions. At the same time, the value of a decision made by a group is higher and its competence is greater than that of a decision made individually.

Practice shows that the least effective are decisions made at a level exceeding the required competence. These include decisions that go through a complex path of coordination from bottom to top. Remember:

The less significant the problem, the lower the effectiveness of its solution at the level of the head of the institution.
The more minor problems are solved at the level of the head of an institution, the more erroneous decisions he ultimately makes.

Today, creating competitive products is not only a matter of capital, but also a matter of the art of the management team. Recently, the criteria for competence have changed significantly. Until recently, one of the most important advantages of a manager was knowledge of all the work of the lower level. Therefore, it was welcomed when a leader sequentially went through the entire ladder of the service hierarchy. However, the skills of today are not always based on the skills of yesterday. Gradually, the market is filling up, competition is intensifying, working conditions are becoming tougher, and mistakes in decision-making are becoming more and more expensive. And soon a moment may come when they will begin to lose in the competition only because they do not master modern decision-making technologies. Therefore, it is worth learning this today so as not to make mistakes tomorrow.

Tatiana Suzdaltseva