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Q-6. Distinguish between closed decision making system & open decision making system?

What is what if' analysis? Why is more time spend in problem analysis &problem definition as compared to the time spends on decision analysis? Answer:Closed decision making system & Open decision making system The decision-making systems can be classified in a number of ways. There are two types of systems based on the managers knowledge about the environment. If the manager op e r a te s in a kn o w n e n vi ron me n t th e n i t is a cl o se d d e ci si o n - m a ki n g s y s te m . Th e conditions of the closed decision-making system are: a) The manager has a known set of decision alternatives and knows their outcomes fully in terms of value, if implemented. b) The manager has a model, a method or a rule whereby the decision alternatives can be generated, tested, and ranked for selection. c) The manager can choose one of them, based on some goal or objective criterion. Few examples are a product mix problem, an examination system to declare pass or fail,or an acceptance of the fixed deposits. If the manager operates in an environment not known to him, then the decision-making system is termed as an open decision-making system. The conditions of this system in contrast closed decision-making system are: a) The manager does not know all the decision alternatives. b) The outcome of the decision is also not known fully. The knowledge of the outcome may be a probabilistic one. c) No method, rule or model is available to study and finalize one decision among the setoff decision alternatives. d) It is difficult to decide an objective or a goal and, therefore, the manager resorts to that decision, where his aspirations or desires are met best. Deciding on the possible product diversification lines, the pricing of a new product, and the plant location, are some decision-making situations which fall in the category of the open decisionmaking systems.- 17 Th e M IS tr i e s to co n ve rt e ve ry o p en syste m to a cl o se d d e ci si o n -ma ki n g s y s te m b y p r o vi d in g in f o rma ti o n su p p o rt fo r th e be st d e ci si o n . Th e MIS gi v e s th e i n fo r m a ti on s u p p o r t , w h e r e b y t h e m a n a g e r k n o w s m o r e a n d m o r e a b o u t e n v i r o n m e n t a n d t h e outcomes, he is able to generate the decision alternatives, test them and select one of them. A good MIS achieves this. What if analysis D e ci s i o n s a re ma d e u si ng a mo d e l o f th e pro b le m fo r d e ve l o pi n g va ri o u s s o lu ti o n alternatives and testing them for best choice. The model is built with some variables and relationship between variables considered values of variables or relationship in the model ma y n o t h o ld go o d a n d th e r e fo r e so l u ti on n ee d s to be te ste d fo r an o u tco me , i f the considered values of variables or relationship change. This method of analysis is called' what if analysis.' F o r example, in decision-making problem about determining inventory c o n t r o l parameters (EOQ, Safety Stock, Maximum Stock, Minimum Stock, Reorder level) lead-time is assumed fairly constant and stable for a planning period. Based on this, the inventory parameters are calculated. Inventory manager wants to know how the cost of holding inventory will be affected if lead time is reduced by one week or increased by o n e w e e k . The model with changed lead time would compute the cost of holding inventory under new conditions. Such type of analysis can be done for purchase price

change, demand forecast variations and so on. Such analysis helps a manager to take more learned decisions. What if analysis creates confidence in decision-making model by painting a picture of outcomes under different conditions? Why is more time spend in problem analysis & problem definition as compared to the time spends on decision analysis? The manager, being a human being, behaves in a peculiar way in a given situation. The response of one manager may not be the same as that of the two other managers, as they d i ffe r on th e be h a v io r a l pl a tfo rm. E ve n th o ug h to ol s, me t ho d s an d p ro ce d u re s a re evolved, the decision is many a times influenced by personal factors such as behavior. The managers differ in their approach towards decision-making in the organization, and, therefore, they can be classified into two categories, viz., the achievement-oriented, i.e., looking for excellence and the task-oriented, i.e., looking for the completion of the task somehow. The achievement-oriented manager will always opt for the best and, therefore, will be enterprising in every aspect of the decision-making. He will endeavor to develop all the possible alternatives. He would be scientific, and therefore, more rational. He would weigh all the pros and cons properly and then conclude. The managers personal values will definitely influence ultimately. Some of the managers show a nature of risk avoidance. Their behavior shows a distinct pattern indicating conservative approach to decision-making a path of low risk or no risk. Further, even though decision-making tools are available, the choice of the tools may differ depending on the motives of the manager. The motives are not apparent, and hence, are difficult to understand. A rational decision in the normal course may turn out to be different on account of the motives of the manager. T h e behavior of the manager is also influenced by the position he holds in the o r g an i z a tio n . Th e b eh a vio r is in fl u en ce d b y a fe a r an d a n a n xi e ty tha t th e p e r s on a l image may be tarnished and the career prospects in the organization may be spoiled duet a defeat or a failure. The managerial behavior, therefore, is a complex mix of the personal values, the atmosphere in the organization, the motives and the motivation, and the resistance to change. Such behavior sometimes overrides normal decisions based on business and economic principles. The interplay of different decision-making of all the managers in the organization shapeup the organizational decision-making. The rationale of the business decision will largely d e p e n d upon the individuals, their positions in the organization and their interrelationship with other managers. If two managers are placed in two decision-making situations, and if their objectives are in conflict, the managers will arrive at a decision objectively, satisfying individual goals. Many a times, they may make a conscious decision, disregarding organization's objective to m e e t th e i r p e r son a l g oa l s a nd to sa t i sfy the i r p e rson a l val ue s . If th e m a na g e r i s enterprising, he will make objectively rational decisions. But if the manager is averse totaling risk, he will make a decision which will be subjectively rational as he would act with limited knowledge and also be influenced by the risk averseness. Thus, it is clear th a t i f th e a tt i tud e s a n d th e mo t i ve s a re no t co n si st en t a cr o ss th e o rga n i za tio n , th e decisionmaking process slows down in the organization.