NAME OF THE INSTITUTION

 

МАNАGING UNDЕR UNСЕRTАINTY: ОBSЕRVАTIОN RЕVIЕW

BY

STUDENT NAME

 

(Description of the Study)

 

 

 

STUDY LEVEL

COURSE NAME

DATE


 

 

  1. Observation Summary (300 words)
  2. Analytical Writing
    • The Theory of bounded rationality
    • Nature of decision making
    • Decision making processes
    • Uncertainty and risk
  3. Decision Making Process
    • What decision you would have made in this decision (Use the theory of bounded rationality to reflect on your reason for decision making)


 

 

Observation Summary

This study is a review of the nature of projects that take place in the construction industry. It uses the case study of Amco Engineering Company Ltd, a construction company in the United Kingdom. Amco is a company that engages in a multiple operations in the areas of Civil Engineering, electrical engineering and mechanical solutions to a variety of industries. It engages in both construction works and project management. Some of the challenges that Amco deals with so often is in provide quality service to all its many clients. This study focuses on a specific factor that influenced critical decision making in two years ago.

Being a contactor that companies prefer, it had to complete two construction works at the same time. The project manager realized that unless they rescheduled one of the construction tasks, a conflict was inevitable between the two and both clients of the companies were threatening to pull out. The project manager made a request to the human resources to employ additional staff on temporary contract to enable them complete the two tasks simultaneously. The Human resources forwarded the decision to the executive board for consideration, where it took two weeks and three days for the board to finally arrive at the final decision. The human resources department approved the request, and recruited temporary staff that assisted in the site based tasks at the construction sites. This decision was very critical for Amco Engineering because it was at a risk of losing two pillar clients concurrently. The cost implication of the decision was less than the value that it rescued by maintaining the clients. The two clients never quitted the company as they had threatened, since the level of client service that they obtained was satisfactory. In essence, the factor that influenced the move to make that decision was the influx in the order numbers and sizes versus the shortage of workforce to match the amount of work.

The Theory of bounded rationality-Explain the decision making process in this situation

As it is in the theory of bounded rationality, a decision making process recognizes that the individuals have limited rationalities due to the limited information they possess. Their mental cognitive abilities are also limited. This theory also explains that individuals have limited amount time to make decisions. However, the theory of bounded rationality maintains that in spite of the limitations of a man, decision making is a completely rational process of obtaining an optimal decision solution depending on the accessible information. In the real sense, decision makers usually seek satisfactory decision instead of the optimal choices. In this study, the theory of bounded rationality applies in the nature of the decision making and the processes of looking for optimal decision.

Nature of decision making

The kind of decision that the project management team and the construction engineers had to make was a critical one. It required quick response, but because of the limitations in discretions, the team had to follow a chain of bureaucracy. It had to contact the Human Resources, which again presented the request before the board. Despite the urgency of the decision, it took two more weeks to complete the decision process. The team was aware of the optimal solution they expected but could not have arrived instantly. This indeed is how the theory of bounded rationality applies in the scenario at AMCO Engineering Company. There was another limitation in terms of time. Human resource did not have sufficient time to explore the parameters that warranted recruitment of more staff. Another limitation was in the cognitive capabilities. It could not relate different parameters at the same time to determine whether their decision was optimal or merely satisfactory. Perhaps there was a different idea which could have yielded better returns that the quick choice of staff recruitment. Cognitive limitation manifested in the board sitting as well because even during the two weeks of deliberation, they never saw the need to survey the situation on the ground. They never approached the two clients to negotiate deals with them, but implemented an idea that had not stood the test of time.

Decision making processes

The decision making process in the company began at the point of problem identification. The project management team managed to establish that the challenge was the work load they had in serving the two company clients concurrently. There was a risk of delivering poor service to clients, which could have escalated to them withdrawing from AMCO. After the identification, the team leader took the next step of formulating a formal request to the relevant entity, that is, human resources department. The next step was for Human resources to involve the senior and executive decision makers, who are members of the board. The board had to sit in committees to discuss the implications of the decision on the company performance, compared to the benefits the company was going to have. Having confirmed that it was a rational decision, they approved the proposal, and allowed Human resources to proceed with the recruitment process.

Uncertainty and risk

There were possible risks that the team had to grapple with in the process of pursuing the optimal decision. Of course, the first risk is the possibility of losing the clients. The impact of the risk could have been critically high, considering that the two were the pillar clients of AMCO by that time. Secondly, the decision to recruit more staff had not gone through the right channel of critical analysis. There was limitation in the time, and every action had to be extremely quick. This was a risk to the entire company, because it would cause a sudden increase in staff overhead. This had a negative influence on the overall performance of the company, in a temporary process of salvaging its reputation. Even before deciding to approach the Human resources with a proposal to recruit temporary employees, there was a risk of incurring a long bureaucratic process of making the board of directors to make approvals. Implementing a new idea requires risk analysis and a standard approval policy to govern the nature of decisions that a company has. This is a preventive risk management control. It is cheaper and more effective than corrective remedies after experiencing a loss. The amount spent on paying new staff was not in the mind of decision makers at the beginning of the year. It is a risk of implementing budgets without control.

The decision I would have made in this decision (Using the theory of bounded rationality to reflect on your reason for decision making)

Managing a company definitely involves a struggle to overcome uncertainties. So often, decision makers come across situations where they have to make critical decisions within limited times and with limited resources. The situation at AMCO Engineering was a typical illustration of management within uncertainties. Before making any decision, it is logical to engage the construction team in a discussion to establish their strategic plan. Through this, we would be able to understand their challenges and establish their work targets. The next step would be to form a risk assessment team. The team would have the task of measuring and evaluating the impact that the decision on the core objective, values and the overall reputation of AMCO Engineering in the global market. As a matter of fact, there is a possibility that we could succeed in negotiating with the clients to reschedule some of the project timelines. This would be easy for us to manage our targets using the existing number of staff. With regards to the bounded rationality theory, the idea of employing temporary staff was a satisfactory decision, not an optimal one. It came up as a product of limited cognitive ability, limited time and limited knowledge. Ideally, there is no rationale in making such a heavy step to recruit a team just to cover up the deficiencies in AMCO Engineering. The optimal solution is to focus on a sustainable strategy, considering that a similar situation may occur again in the future. Reflecting on the results of the decision that the board finally approved, there was no benefit in mitigating the time limit. Two weeks was too long for a team that wants to cover up its shortage of workers. If the risk evaluation proves that the staff overhead is manageable, the best decision then would be to employ additional staff on permanent basis to avoid a situation where we have to recruit and release temporary staff. That would be an optimal solution to the situation, because it would solve the shortage once and permanently. Even though the decision was not effective, we cannot refer to it as being irrational. We have to understand that every action has its consequences. Decision makers have to place a company profile to a level where it can withstand hostile consequences.

Influx in job volumes ought to be a blessing to a performing company. Nevertheless, when a company has poor decision structures, this nature of blessing translates to a crisis. An effective decision articulates not only the strategic objectives of a company, but also the level to which their services satisfy their clients. Effective management of uncertainties depends on the company culture. We would therefore, have to establish a culture of collective action and teamwork. We would have to embed the sense of ownership of AMCO Engineering among all employees. It doesn’t mean that only the construction engineers could do the construction works. Every employee should learn the tasks that take place in various departments. With this in place, we realize that we have the ability to manage all uncertainties in our organization.

 

 

 

References

Fitzgerald, M. (2013) (Compiler), Managing Under Uncertainty, a qualitative approach to decision-making, Pearson, Sydney (2nd edition).

Snow, R. M. & Phillips, P. H. (2007). Making Critical Decisions: A Practical Guide for Nonprofit Organizations, New York: John Wiley & Sons.

Gigerenzer, G. (2002). Bounded Rationality: The Adaptive Toolbox, London:MIT Press.

Lang, B. & Müller, M. (2010).Bounded Rationality Theory – Theorie der begrenzten Rationalität, Berlin: GRIN Verlag.

Shapira, M. (2002). Organizational Decision, Cambridge: Cambridge University Press.