Decision Making and Systems Theory in Organizations

Decision Models and Risk Management

In this process, there is a preamble moving from total uncertainty to certainty. Degree of Risk: This implies that a satisfactory decision is positive. Whether dealing with uncertainty or certainty, the primary objective is to reduce the degree of risk.

The probability that a decision is perfectly accurate is often remote; therefore, the most effective approach is to minimize the degree of risk. By accepting that risks exist, evaluating them, and determining how to minimize them, an organization can operate effectively over time through the use of information and power.

The Delegation Process

The decision-making process may extend through a complementary stage called the delegation process. Delegation involves the temporary transfer of functional authority to one or more persons to fulfill an objective in a timely manner. This process consists of several stages:

• Assignment: This is the stage where one analyzes the necessary capabilities and profiles required for the task.
• Training: This can involve a talk or specific guidance.
• Monitoring: There must be consistent monitoring to see if the delegated individuals require assistance.
• Feedback: This involves analyzing the experience and the work performed; through this process, one can decide to reassign or retrain.

Systems Theory 1954

Developed by Bertalanffy, Johnson, Katz, and Rosenzweig, this theory analyzes systems in areas outside of traditional organizations, such as the universe and physics. The first thing to note is that we can observe many complex systems or levels. Complexity can be determined in the following order:

1. Static: The Universe.
2. Simple Dynamic: Different mechanisms, such as a clock.
3. Control Mechanisms: Thermostats; in an organization, these are represented by maximum and minimum stock levels.
4. Open Systems: Cells that can reproduce are open systems. An organization is also an open system that utilizes feedback from suppliers, customers, and people.
5. Primary Genetic Level: Vegetables.
6. Secondary Level: Animals.
7. Tertiary Level: Man (this remains a set of more complex processes).

Human vs. Organizational Processes

From these levels, we can deduce the differences in processing. A normal process for a person is: "I doubt, I ponder, I act." Conversely, the normal process for an organization is: Plan, Analyze, Doubt, Run, Control, and Check.

Ramsay’s Definition of a System (1975)

Ramsay defines a system as a set of elements in constant dynamic interaction, organized to reach a certain goal. Key characteristics include:

• Feedback: The possibility of being revised and improved.
• Evolution: Systems change and evolve over time through their interrelationship with the environment.
• Persistence: Systems are not destroyed; they change, and something of the original always remains.
• Homeostasis: The tendency toward equilibrium.
• Equifinality: The process is often more important for reaching the result than the outcome itself.
• Totality: This means the system has a separate identity that is identified with its components.

Organizational culture identifies a company; if you change a component, you change the identity of the entire system.