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Chapter 3

Problem-solving and decision-making

( 4 readings )

Reading -1 Solving problems and making decisions in organizations

  • Solving problems and making decisions in organizations form a key part of managerial activity. Decision-making can :-

1- Take place without investigation of a problem . Daily, managers are exposed to identical problems that are known or have standard solutions and thus no need to investigate but only to choose the standard solution.

2- Be a process of deciding between options or solutions. Ex.:

a- Right now decision (as in crisis) needs to be made , a situation which needs investigation and to which there are some obvious solutions, but the ‘right’ solution will require investigation to ensure that it ‘fits’ and work.

b- In other situations, solutions can’t be developed until the problem is investigated .This is because the problem could be one of several possible problems. Once the problem is investigated, effective action can be taken.

Ways of thinking about problems

  • The term ‘problem’ often seems negative. Essentially a problem is simply a gap between a situation that exists now and what is desired ( i.e. between what is and what should be) . The word problem can mean:

Something has gone wrong.

Expectations have changed.

Something needs improving.

Something is needed that isn’t in place.

More than one of the above has happened.

  • Not all problems and opportunities are straightforward and self-contained. There may be many causes that are beyond manager’s control.
  • An opportunity to make an improvement may have implications on other organization parts and on other people beyond a manager’s influence.
  • Before going far through the process of problem-solving we need to look carefully at the kind of situation we are dealing with . There are several ways of thinking about this. One is the degree to which a situation is part of a related set of problems or situations , i.e. how ‘bounded’ a problem is.
  • Characteristics of a bounded problem or difficulty:-

Problem is known and identified.

Problem needs and elements are known.

Possible solution is known.

Priorities are clear.

There are limited implications.

Problem can be treated in isolation from other issues.

Few people are involved.

Timescale is limited.

  • At the other end are unbounded problems with the following features:-

Problem is unknown and unidentified.

You don’t know what needs to be known.

Possible solution is unknown.

Priorities are called into question and are unclear.

5. Problem cannot be isolated from other issues.

6. The implications are uncertain, may be great and worrying.

7. Great number of people are involved .

8. Longer and uncertain timescale.

Resources are ill-defined and may alter over time.

It is not clear who are the significant players .

The situation may well be highly political too.

  • Unbounded problems are more typical where work is less routine ex. projects where there is a great deal of risk, uncertainty and ambiguity.


A second way of viewing problems is to consider problems and solutions as a matrix of known and unknown problems and solutions.( figure 3.1)

  • In known problem/unknown solution cell , the problem is likely to require some further investigation so that a satisfactory resolving solution can be found. Known problems are not necessarily fully understood problems, which in turn makes finding a solution harder.
  • In unknown problem/unknown solution cell , consider a situation in which a manager wants to make an improvement to a system. The ultimate goal is known – improvement – but any current problems within the system are not known, so the solution that will improve the system is not known.
  • Unbounded problems have features of known problem/unknown solution and of unknown problem/unknown solution.
  • In known problem/known solution cell , problem is bounded . However, this situation presents a challenge in the sense that while deciding between options , there is a danger that the problem is not quite ‘known’ as it is assumed.
  • In unknown problem/known solution cell , a manager may have a favored solution and actively seek a problem where it can be used. For example, a manager may favor pay incentives as a way of improving performance. This may be effective in some cases but not if the person requires training or better resources to do the job.

Reading -2 Problem solving framework

  • Problem-solving is what we do when it would be inappropriate to make a decision without investigating a situation.
  • Applying ‘rational’ models in complex situations is very difficult. An alternative core model (basic framework) is :-

1. Analyze the problem.

2. Draw conclusions from your analysis.

3. Set the criteria for a solution.

4. Identify an appropriate solution.

5. Draw up an action plan.

  • In practice, people frequently work through the steps in an iterative way. This may involve working backwards, then forwards, or on several steps at once.


Exploring the basic framework

1- Analysis: One way to decide if there is a problem and what kind it is , ask:

1- What is happening to make you think there is a problem that needs dealing with?

2- How and when is it happening and to whom?

3- Why is it happening?

  • By asking above questions it is likely to find that those involved in the situation have different perspectives about describing the problem . This can be useful in identifying misunderstandings and potential conflicts and how problem is related to others.
  • Normally a complex problem is the result of several related problems (or just one deeper problem), so you may need to break it down into its component parts. Diagrams are useful tools and help to reveal the relationship between different aspects and components of a problem and ( system maps, sign maps ,multiple cause diagrams ).
  • In this step your and others assumptions should be checked after which we can develop better solutions and argue for them in a more convincing way.

2- Drawing conclusions: Conclusions are what you infer from your analysis. They are judgments about the situation derived from your analysis. They are not solutions but they help to clarify and state your goals for a solution for the next stage in the problem-solving process.

3- Set the criteria for a solution : A solution is an action or set of actions that should solve the problem . Before identifying a solution , set objectives , goals or criteria which the solution needs to achieve.

4- Identify an appropriate solution: Develop solutions and choose the best that matches set criteria . The solution must relate to the problem and match what you are trying to achieve, keep or eliminate.

  • A solution to a problem is likely to be presented as a set of recommendations especially when the participation and involvement of others is necessary as part of the decision-making process.

  • Recommendations are proposals for action. They depend on, or be constrained by, a number of factors in the organization. The constraints might include other objectives, current systems, personnel, costs, culture, cooperation of others, availability of information and time available to resolve the problem

  • Recommendations should be as SMART as possible:-

Specific : Proposals or objectives must state clearly what is to be achieved.

Measurable : They must state how success will be measured.

Agreed : With the person who will carry out the proposals and with anyone affected by the process or result.

Realistic : They must be achievable within the constraints of the situation and in alignment with other objectives.

Timed: There must be a target time to achieve objectives.

5. Develop an action plan : After setting SMART recommendations managers should:-

1- Turn them into an action plan.

2- Consider implementation steps , who will be involved, time , cost and communication.

3- Consider how progress will be monitored to ensure that the objectives are met since an action can result in unintended negative consequences that could be avoided if considered early.

  • Implications (advantages and disadvantages) of an action plan should be handled . The consequences of proposals:-

a- Advantages are positive outcomes which will help to ‘sell’ it to others. (Ex. new opportunities that might arise as a result of proposal implementing ).

b- Disadvantages are the negative consequences of proposal. Setting out the disadvantages of a solution .

  • No one can be certain that every part of a solution will work, or that circumstances will remain the same. Since uncertainties cannot be removed, major ones should be identified and level of risk taken should be aware of.
  • Assessing risk amount is helpful to estimate the probability of events happening as predicted. Various techniques exist for assessment (For example, examine past experience. If a similar event has happened repeatedly in past, one may be able to use information about it to predict the probable outcomes of future events. Alternatively, subjective estimates can be made that are based on past experience).
  • If the disadvantages of a solution outweigh advantages, you may need to rethink your solution to the problem!

6. Further steps in the problem-solving process: Identify markers that need to be achieved at each implementation stage to enable progress monitoring and to assess whether the solution has been effective.

7. Communicating with and involving others : In a problem-solving process other people will be involved( ex. who carry out the work, or whose work is linked with yours ). Other people inputs is helpful at every problem-solving process stage. (ex. If one strongly opposes your solution, may let you decide to investigate and define the problem without their knowledge)

  • Once a solution to the problem has been decided on, or the recommendations for resolving it, you need to communicate the outcome to everyone who needs to know about it. This mean that when a decision is communicated to them they are not surprised since the decision will involve their ideas as well as yours and is more likely to be acceptable.

  • In reality the problem-solving process is messier than what it looks , because:-

1- The process is iterative.

2- It is likely that a problem itself may not well-defined than it seemed at first.

3- There may be an underlying problem.

4- Information about situation may be incomplete, accordingly wrong assumptions are made

5- There are demands and constraints that limit choices.

6- Since other people are considered at every stage, many of them may not be willing to cooperate.


READING-3
MAKING DECISIONS: COMPARING OPTIONS AND MAKING CHOICES
Decision is a commitment to do something. They vary from small, routine, day-to-day, frequent and quick decisions to those affecting entire organization. From among various options (obvious ones or ones learnt from senior managers) of doing something one has to compare and choose one. Such choice may be easy or tough & arrived at by following a framework.

Mundane =

*

FRAMEWORK FOR COMPARING OPTIONS & MAKING CHOICES

Step-1 Set objectives Specify what you need to achieve. Ensure that desired outcome addresses the situation. Emphasis more on right question rather than right answer. Identify essential, desirable or unacceptable ones.
Step-2 Set decision criteria SMART criteria for successful outcome: Specific, Measurable, Agreeable to those affected, Realistic & Timed
Step-3 Compare options Assess each option against criteria established
Step-4 Select preferred option Make decision
Step-5 Plan implementation Prepare a “SMART” action plan

EVALUATING OPTIONS AGAINST OBJECTIVES & CRITERIA

[eg. purchase of photocopiers]

DECISION CRITERIA OPTION-1 OPTION-2 OPTION-3
ESSENTIAL: Purchase cost Ease of installation Running costs Quality of after-sales support Ease of use Specification Sort facility Stapler Remote operation Print facility
2. DESIRABLE: Binder facility
3. NOT ACCEPTABLE: Paper trays with a capacity of less than 1000 sheets
4. OTHER FEATURES: A new model, 3 months or less since introduction
5. UNCERTAINTIES: Availability of option-3

DECIDING BETWEEN OPTIONS: TOM’S EXAMPLE

TOM’S DECISION TREE


















DECIDING BETWEEN OPTIONS WITH STRUCTURED APPROACH-DECISION TREE
ADVANTAGES
* Shows relationship between options
* Help in identifying different levels of decision
* Appears rational and clear
* Simple technique applicable to low-level problems with several linked options available

LIMITATIONS
* Collection of all necessary information, generating options & evaluation of alternatives can be hard, time-consuming & expensive
* Clear objectives not easy and may involve compromises between conflicting interests
* No time for creative thinking
* Uncertainty in predicting future outcomes may be high
* Supposedly ideal decisions may be rejected


ALTERNATIVES FOR DIFFICULT DECISION BETWEEN OPTIONS
* Choice of less than ideal acceptable option
* Intuitive choice with honesty on underlying reason and justifiability
* Negative approach of going for “least bad” option
* Choice of “best option despite change of circumstance from inaccurate forecast”

Clarity on objectives despite type of approach or subjective judgments

Reading 4 - The problem with problem-solving and decision-making

  • Herbert Simon identified what is known as “bounded rationality” (Simon, 1960). He noted that organizational contexts, politics , time and resource limitations mean that managers are often not able to approach a problem or decision rationally.
  • Problems and decisions, then, may not be addressed in an optimal way: solutions and decisions may be simply ‘the best in the circumstances’. This is known as “Satisficing”
  • It is important to separate bounded rationality from irrationality. A simple example of irrational thinking is continuing to pursue a solution which will not solve the problem encountered.
  • Another factor to consider is that managers seldom deal with one issue at a time. Often, the importance attached to a problem or decision-making will change as time progresses. What was important to a manager yesterday may be overtaken by a more important issue today . That is mangers focus on pressing problems
  • Unexpected events are important factors in problem-solving and decision making. The opportunities people have for problems and solutions shape the way the problem is investigated and the possible solutions to it.
  • James March (1978, 1981) suggests that managers need to be opportunistic , flexible , persistent and open to possibilities. Flexibility will help overcome decisional bias ( of their own or that of others ). Bias can result from the following:

Preferring some approaches to a solution and problem rather than considering equally possible alternatives.

(2) Previous experiences in similar situations.

A simple view of uncertainty

(4) Misconceptions .

(5) Overconfidence.

  • All this can be summarized as the difference between how problems are solved and decisions are made in practice and how the organizations believe they should be solved or made.