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Incorporating a system approach to the
decision making process
S ubmitted in partial fulfilment of the requirements for
Masters of Engineering
GRADUATE SCHOOL OF TECHNOLOGY MANAGEMENT
UNIVERSITY OF PRETORIA
Supervisor: Prof Dr L Pretorius
Incorporating a system approach to the
decision making process
by
YOLANDÈ DU TOIT
ubmitted in partial fulfilment of the requirements for the degree
of Engineering (Technology Management
in the
GRADUATE SCHOOL OF TECHNOLOGY MANAGEMENT
UNIVERSITY OF PRETORIA
May 2011
Supervisor: Prof Dr L Pretorius
i
Incorporating a system approach to the
the degree
Management)
GRADUATE SCHOOL OF TECHNOLOGY MANAGEMENT
© U©Unniivveerrssiittyy ooff PPrreettoorriiaa
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Abstract
According to Harvard Business Essentials (2006) an organisation is a series of decisions linked by implementation and other activities. Decisions set the pace and direction; the rest is follow through.
Paul Nutt has been studying how decisions are made for more than 20 years and have found that decisions fail half of the time, without realising any benefit for the organisation (Nutt, 2002).
Decision making is an essential part of the management function of an organisation. But why do so many decisions fail? Why does the outcome of decisions sometimes not satisfy the initial problem or support the organisation’s goal?
Four decision making processes were analysed for this dissertation, the conclusion was drawn that current decision making processes do not incorporate a clear system approach.
The dissertation shows that a system approach, as defined by systems engineering, satisfies the need for ensuring decisions are made taking into account a holistic picture.
By following a system approach when making a decision, a bigger picture view can be obtained. Having a bigger picture view, will aid the decision maker in identifying whether the decision to make is indeed the right decision to be made, or merely a symptom of another decision or problem. A system approach aids the decision maker to determine where the decision to be taken fits in and what impact it will have on the system.
A system approach to decision making process was designed, incorporating the strengths of the decision making process and system approach methodologies researched.
The system approach methodology can be applied successfully to management decisions. By using this methodology a holistic view is obtained of a decision regarding a problem, resulting in effectively handling and managing the decision or problem.
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- Chapter 1: Introduction........................................................................................... List of Tables vi
- 1.1. Motivation
- 1.2. Research Methodology
- 1.3. Dissertation Structure
- 1.4. Conclusion
- Chapter 2: Background and Context for Decisions
- 2.1. Defining Decisions........................................................................................
- 2.2. Defining Decision Making
- 2.3. The Importance of Decisions and Decision Making
- 2.4. Decision Making Processes
- 2.4.1. The Strategic Managerial process
- 2.4.2. The Harvard 5 Step Process
- 2.4.3. The 6 Step Problem Solving Process
- 2.4.4. The Decision Making Loop Process
- 2.4.5. The Common Thread.............................................................................
- 2.4.6. Strengths and Weaknesses
- 2.4.7. Conclusion
- 2.5. The Problem Statement
- 2.5.1. Background
- 2.5.2. The Problem Statement Defined............................................................ iii | P a g e
- 2.5.3. Research Questions
- 2.5.4. Objectives
- 2.5.5. Limitations and Assumptions
- 2.6. Conclusion
- Chapter 3: A System Approach
- 3.1. Introduction
- 3.2. Defining Systems
- 3.3. Defining the System Approach
- 3.4. The Importance of applying a System Approach
- 3.5. System Approach Processes
- 3.5.1. The TOC Approach................................................................................
- 3.5.2. The Soft System Approach
- 3.5.3. Interpretations of System Approaches
- 3.6. Conclusion
- Chapter 4: Integrated Approach
- 4.1. Proposed Methodology: A System Approach to Decision Making................
- 4.2. Conclusion
- Chapter 5: Process Application Testing
- 5.1. Approach
- 5.2. Case Study 1: Cost Cutting
- Using a System Approach
- Conclusion...........................................................................................................
- 5.3. Case Study 2: Organisational Design...........................................................
- Using a System Approach iv | P a g e
- 5.4. Case Study 3: Training Approach
- 5.5. Conclusion
- Chapter 6: Conclusion..........................................................................................
- List of References
- Figure 1-1: Research Methodology List of Figures
- Figure 1-2: Research Roadmap
- Figure 1-3: Inductive Theory Guidelines
- Figure 1-4: Dissertation Structure................................................................................
- Figure 2-1: Decision Types........................................................................................
- Figure 2-2: Strategic Managerial Process
- Figure 2-3: Harvard 5 Step Process
- Figure 2-4: 6 Step Problem Solving Process
- Figure 2-5: Decision Making Loop Process
- Figure 2-6: The Problem Statement Summary
- Figure 3-1: Organisation as a System
- Figure 3-2: TOC 5 focus step flow diagram
- Figure 3-3: The Soft System Model
- Figure 4-1: A System Approach to Decision Making
- Figure 4-2: Selection Criteria
- Table 2-1: Strategic Managerial Process Description................................................ List of Tables
- Table 2-2: Harvard 5 Step Process Description
- Table 2-3: 6 Step Problem Solving Process Description
- Table 2-4: Decision Making Loop Process Description
- Table 2-5: Decision Making Process Comparison
- Table 2-6: Decision Making Processes' Common Thread
- Table 2-7: Decision Making Processes Strengths and Weaknesses.........................
- Table 3-1: TOC 5 Focusing Steps
- Table 3-2: The Soft System Model Description
- Table 3-3: System Approach Characteristics
- Table 4-1: A System Approach to Decision Making Process Description
- Table 5-1: Resource Cost..........................................................................................
- Table 5-2: Resource Alternatives
- Table 5-3: Training Approaches
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Chapter 1: Introduction
"In every success story, you will find someone who has made a courageous decision." - Peter F. Drucker
Chapter 1 gives an introduction to the dissertation, firstly describing the motivation for the dissertation and secondly the research methodology followed. The chapter is concluded by providing a brief overview of the dissertation structure used.
1.1. Motivation
According to Harvard Business Essentials (2006) an organisation is a series of decisions linked by implementation and other activities. Decisions set the pace and direction; the rest is follow through.
It is then self-evident that decision making is an essential part of the management function of an organisation. But why do so many decisions fail? Why does the outcome of decisions sometimes not satisfy or address the initial problem or support the organisation’s goal?
According to Paul Nutt (2002) decisions fail half of the time; this dissertation gives an appropriate overview of why decisions fail and how a system approach can be leveraged to avoid making the wrong decision.
1.2. Research Methodology
Inductive theory building was used in the research process of the dissertation, drawing conclusions from a number of processes researched to form a general theory. Figure 1-1: Research Methodology illustrates the research methodology used. The figure has been adopted from Carole, et al (2003) and the approach is highlighted by darker blocks.
Incorporating a system approach to the decision making process
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A second type of study was completed namely comparative study. During the application of the integrated systems model, Different applications of the model were compared with each other under different scenarios.
The rese arch strategy followed for this dissertation is applied research 2003); the model developed is specifically focused on supporting decisions to be made on management level in organisations.
Figure 1-2: Research Roadmap
FIGURE 1-2: RESEARCH ROADMAP
The research methodology used can be summarised management research. Management research is defined as a specific dimension of business research, where the research is concerned with influences on the work behaviour of people, in this dissertation decision making, how to a effectiveness and productivity
Management research is research that has a theoretical base, however incorporates within them the potential to take action
Incorporating a system approach to the decision making process
A second type of study was completed namely comparative study. During the application of the integrated systems model, this type of study was completed. Different applications of the model were compared with each other under different
arch strategy followed for this dissertation is applied research ; the model developed is specifically focused on supporting decisions to be made on management level in organisations.
Research Roadmap illustrates the research methodology used.
OADMAP
The research methodology used can be summarised into one methodology, namely management research. Management research is defined as a specific dimension of business research, where the research is concerned with influences on the work behaviour of people, in this dissertation decision making, how to achieve efficiency, effectiveness and productivity (Carole, et al., 2003).
Management research is research that has a theoretical base, however incorporates within them the potential to take action (Easterby-Smith, et al., 2002). Easterby
A second type of study was completed namely comparative study. During the was completed. Different applications of the model were compared with each other under different
arch strategy followed for this dissertation is applied research (Carole, et al., ; the model developed is specifically focused on supporting decisions to be
illustrates the research methodology used.
into one methodology, namely management research. Management research is defined as a specific dimension of business research, where the research is concerned with influences on the work chieve efficiency,
Management research is research that has a theoretical base, however incorporates
. Easterby-Smith
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(2002) has noted the distinctive difference between management research and other research approaches.
- Management is a very diverse function within an organisation, it incorporates multidisciplinary functions for example economics, anthropology and mathematics. Therefore the researcher is at a cross road whether to adapt a single or a transdisciplinary approach.
- Unless either commercial or personal advantages can be realised through research, managers will not give access to their organisation. This leads to problems getting access to organisations for fieldwork and confidentiality clauses can limit the research as well.
- Management requires both thought and action. Managers require research that will enable them to take action on the research.
The management research approach was used by designing a model which can be applied across multi disciplinary functions within management. The designed model is based on research conducted on existing approaches and incorporating the approaches to enable managers to practically implement the model in the organisation.
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- Develop a substantial body of observations or data
For the dissertation a variety of decision making processes were analysed to form a conclusion on why decisions made do not realise benefit for the organisation. From the conclusion drawn, two system approaches were identified and analysed for the incorporation into the decision making processes.
- Formulate valid concepts
The theory formulated for the dissertation was based on management decisions and that a lack of a system approach to these types of decision leads to the decision not always realising the intended benefit for the organisation.
- Look for evidence of causality and identify causal mechanisms
Concepts are formed inductively, from observing reality (Locke, 2007). The facts discovered from the observed members of a group are generalized to all members within the group, even though not observed.
For the dissertation a group of decision making processes were analysed, however due to the mass majority of available decision making processes, conclusions were drawn based on the selected group and findings were generalized to all decision making processes.
- Tie in valid concepts from other sources and theories where applicable
The dissertation ties in two concepts, namely, decision making and system approach. The dissertation focuses on how these two concepts can be incorporated to leverage each approach‘s strengths.
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- Integrate the totality of findings and concepts into a non-contradictory whole
The conclusion drawn from the dissertation and the case studies was compared with the initial problem statement identified. Locke (2007) explains in his paper if the expected outcomes are not achieved, the theory was incorrect or the theory should be amended or replaced, alternatively the theory was incorrectly tested.
In retrospect, for this dissertation the conclusions drawn do satisfy the problem statement.
- Identify the domain and boundary conditions for the theory
For the dissertation a clear scope was defined in section 2.5.5, which stipulates that the research topic was limited to management decisions.
1.3. Dissertation Structure
The dissertation is systematically outlined, firstly an introduction is given motivating why the topic has been chosen to be researched and an overview of the research methodology used is given. Chapter 2 provides an overview as to the meaning of decisions, decision making and processes followed when making a decision. An analysis is done on existing decision making processes, identifying both the strengths and weaknesses of the processes, and this forms the basis of the dissertation.
In Chapter 3 more detail is given around what a system is, the general system approach and two specific system approaches that are followed. In Chapter 4 the two concepts, decision making and system approach, are incorporated into one model.
In Chapter 5 the integrated model is tested by applying the model to three practical case studies.
The dissertation concludes with Chapter 6, describing the benefits of using the integrated system approach decision making model.
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1.4. Conclusion
Decision making is an essential part of the management function of an organisation, but often fails. Through a management research approach, this dissertation aims to address this statement. The dissertation gives an introduction to decisions, decision making and why decisions fail.
System approach is analysed to determine how the approach can be incorporated with the decision making processes to form an integrated model.
A model is defined, based on the analysis, which will support the management decision making function.
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Chapter 2: Background and Context for Decisions “Indecision is the thief of opportunity” – Jim Rohn, business philosopher.
Chapter 2 gives an overview of decisions, decision making and the processes used during decision making. In this chapter decision making and the strengths and weaknesses of the processes followed are placed in context. The problem statement for the dissertation is stated and elaborated in this chapter.
2.1. Defining Decisions
Peter Drucker defines a decision as a judgement, a choice between alternatives, however rarely a choice between right and wrong. Drucker goes further to describe that it is at best a choice between “almost right” and ”probably wrong” – but much more often a choice between two courses of action neither of which is provable more nearly right, than the other (Drucker, 1967).
Managers within organisations, regardless of industry or the size of the organisation, are faced with numerous decisions each day. The types of decisions can vary from determining resource requirements for a department to product strategies to follow.
Decisions can be classified into six groups (Teale, et al., 2003):
- Structured decisions;
Decisions that are considered to be clear, unambiguous and easily definable.
- Unstructured decisions;
Decisions that are unclear, ambiguous and difficult to define.
- Programmed;
Decisions that rely on some form of predetermined organisational apparatus or routine that occurs, e.g. a procedure. Jennings (1994) defined programmed decisions as the extent to which the decision is repetitive, routine or a definite procedure has been established for making the decision.
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According to David Langford (Langford, et al., 2001) and Crawford (Crawford, 1997) three types of decision exists in organisations:
1. Operational Control decisions
Operational Control decisions deal with transforming inputs into outputs. The majority of an organisation’s time will be spent on operational decisions. These involve making decisions about carrying out the specific tasks set forth by strategic planners and management. Determining which units or individuals in the organisation will carry out the task, establishing criteria of completion and resource utilisation, evaluating outputs - all of these tasks involve decisions about operational control.
2. Administrative decisions / Management Control decisions
Management Control decisions relate to organisational structuring and resource allocation. These decisions are concerned with how efficiently and effectively resources are utilised and how well operational units are performing. Management Control involves close interaction with those who are carrying out the tasks of the organisation; it takes place within the context of broad policies and objectives set out.
3. Strategic decisions
Strategic decisions relate the organisation to its business environment. Their effect is diffused throughout the organisation over time and therefore has an impact on the previous two forms of decisions. Strategic decisions are externally focussed rather than inwardly within the organisation and are to do with deciding what business the company is in currently and what it should be in. This level of decision making is concerned with deciding on the objectives, resources and policies of the organisation.
Figure 2-1: Decision Types illustrates the different types of decisions in an organisation and at which level the decision is to be taken. The figure graphically
Incorporating a system approach to the decision making process
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High-level Management / Executives
Middle Management E.g. Operations Manager
Lower Level Management E.g. Line Managers
illustrates the decision types and levels set out by Langford (2001) and (1997).
FIGURE 2-1: DECISION TYPES
2.2. Defining Decision Making
It has been said that administration is the critical organisational process, making possible production, procurement and the rest; that leadership is the heart of administration; and that decision making is the key to leadership (Gore, et al., 1964).
Decision ma king can be defined as follows:
- Acts of choice between alternative courses of action designed to produce a specified result and one made on the review of relevant information guided by explicit criteria (Teale, et al., 2003)
- A conscious and human process i based upon factual and value premises, which includes a choice of one behavioural activity from one or more alternatives with the intention of moving towards some desired state of affairs
Incorporating a system approach to the decision making process
illustrates the decision types and levels set out by Langford (2001) and
Defining Decision Making
been said that administration is the critical organisational process, making possible production, procurement and the rest; that leadership is the heart of administration; and that decision making is the key to leadership (Gore, et al., 1964).
king can be defined as follows:
Acts of choice between alternative courses of action designed to produce a one made on the review of relevant information guided by (Teale, et al., 2003) A conscious and human process involving both individual and social phenomena based upon factual and value premises, which includes a choice of one behavioural activity from one or more alternatives with the intention of moving towards some desired state of affairs (Elliott, et al., 2005)
illustrates the decision types and levels set out by Langford (2001) and Crawford
been said that administration is the critical organisational process, making possible production, procurement and the rest; that leadership is the heart of administration; and that decision making is the key to leadership (Gore, et al., 1964).
Acts of choice between alternative courses of action designed to produce a one made on the review of relevant information guided by
nvolving both individual and social phenomena based upon factual and value premises, which includes a choice of one behavioural activity from one or more alternatives with the intention of moving
