System04104: Managerial Decision-Making and Rationality Essay

This essay provides an in-depth analysis of managerial decision-making, exploring the concept of alternatives as crucial for minimizing risks and expanding decision-making options. It then delves into the three faces of overconfidence—overestimation, overplacement, and overprecision—explaining how these biases can lead to poor decision-making. The essay contrasts this with the rational decision-making process, which follows a systematic, six-step approach: problem identification, decision criteria selection, generating alternatives, evaluating alternatives, making a decision, and implementing the solution. By examining both flawed and effective approaches, the essay offers a comprehensive understanding of how managers can improve their decision-making skills to achieve better outcomes.

Managerial Decision making
Essay
System04104
2/3/2019

An alternative in decision-making is the second option that is available for making a
decision about a problem which provides the second optional solution if the first one is
already used or done, or it can also replace the first option. An alternative is important for
decision-making because it provides a wide range of decision-making option for taking any
decision and minimise the risk that might be possible in the first option for decision-making.
Consider the boundaries while making any decision is an essential thing. For example,
rationalize and understanding the problem is more important while making any decisions. A
decision maker needs to know what is the problem and how it can be resolved. Setting
boundary conditions by a person should not limit himself to something that is impossible or
impractical, rather a person should always ready to take the risk and make their decision
which is action oriented. If a person cannot act on his/her decision, then it is a waste of time.
Three faces of overconfidence overestimation, overplacement, and overprecision.
1. Overestimation: Sometimes people overestimate their accuracy or ability to handle
the situation to deal with a particular situation or predicting things, which is based on
future conditions. A person if feel overconfidence then he/she might overestimate
situation or problem that he/she faces.
2. Overplacement: It is one of the most noticeable expressions in the overconfidence
effects. Overplacement is a judgement about your self-performance comparing to
others. If a person thinks about himself as the superior performer in compare to the
other average performer, even he/she is not able to cross the average line of
performance set by other people. It is a mentality of a person when he placed himself
superior to others, but he is not. In simple and in a single sentence it can be said that
overplacement is an ability of a person to think himself superior and person always
trying to self-enhance.
3. Overprecision: Sometimes people over-assure from their past success that leads to
the over precision about a situation or decision-making. Overprecision comes in the
mind of a person if he/she does over and excessive faith even person knows the truth.
It is a dangerous type of overconfidence.
A human being sometimes biases from overconfidence because it is human nature.
These three faces of overconfidence are caused bad historic decision-making because people
believe good things about themselves and about the skills because of their overconfidence.
These three faces of overconfidence caused bad decision-making. For example, an

overconfident people think himself superior to other people and make decisions on their own
behalf and ignoring other ideas, even the decision-maker knows that he is not able neither
he/she has perfect knowledge for making any decision regarding the particular problem or
situation.
Rational decision-making follows a set of process or follow an orderly path from
problem to solution. It is based on systematically selecting the best alternative solution or
making decisions among the available alternatives to a problem or any situation. In a rational
decision-making process, a decision-maker often considered analytical steps related to
reviewing the relevant facts and observations, and also consider the possible outcome before
choosing a particular course of action. The rational decision-making resulted in unbiased
decision-making that is based on facts. The six steps in rational decision–making are as
follow:
1. The first step in rational decision-making is identifying and defining the problem,
which exists and needed a solution to resolve. A decision maker articulates what
exactly the problem and what are the effects of the problem.
2. The second step is identifying decision criteria. This step deals in choosing variables
that will determine the decision outcome. For example, to increase the profit in the
organisation a businessman determines the criteria or information that will help in
increasing the profit of the organisation.
3. The third step is generating the alternatives, which is based on the information
gathered in the second stage. In this step, the number of potential solutions needs to
be considered while generating a list of alternatives.
4. The next step is to evaluate the available alternatives. In this step, each alternative
compares and contrast with each other and also determine the consequences.
5. Making a decision or choosing the best alternative is the next step where a best
alternative solution is selected by the decision-maker to resolve the problem, which
scores higher in the evaluation process of alternatives.
6. Implementing decision for the solution is the final step where the selected best
alternative successfully implemented to resolve the problem and a decision maker
also evaluate the final outcome after implementing his/her best decision to find out
the solution.

If these six steps are implemented in decision-making, it can be said that the decision
taken by the person is the rational decision-making.