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THE PROBLEMS IN MAKING RATIONAL DECISIONS


(a) Ascertaining the problem:As Peter Drucker points out, .the most common source of mistakes in the management decisions is the emphasis on finding the right answers rather than the right questions.. The main task is to define the right problem in clear terms. The management may define the problem as the .Sales are declining. Actually, the decline of sales is symptomatic; the real problem may be somewhere else. For example the problem may be the poor quality of the product and you may be thanking of improving the quality of advertising.

(b) Insufficient knowledge:For perfect rationality, total information leading to complete knowledge is necessary. An important function of a manager is to determine whether the dividing line is reached between insufficient knowledge and the enough information to make a decision.

(c) Not enough time to be rational:The decision maker is under pressure to make decisions. If time is limited, he may make a hasty decision which may not satisfy the test of rationality of the decision.

(d) The environment may not cooperate:Sometimes, the timing of the decision is such that one is forced to make a decision but the environment is not conducive for it. The decision may fail the test of rationality as the environmental factors considered in the decision-making turn out to be untrue. For example, in a product pricing, the factor of oil and petroleum product price is considered as stable. But the post decision environment proves the consideration to be wrong.

(e) Other limitations:Other limitations are the need for a compromise among the different positions, misjudging the motives and values of people, poor communications, misappraisal of uncertainties and risks, an inability of a human mind to handle the available knowledge and human behavior.

http://www.scribd.com/doc/18046759/Chapter-2-various-concepts-of-MIS

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