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Formal training in decision making can help to reduce cognitive bias in strategic management decision making. Strategic management involves among others, developing policies and plans, usually in form of projects and programs, which are designed to achieve companies' objectives. Therefore, strategic managers should be very careful in strategic decision making.
Business and financial institutions are faced daily with decisions about investment, research and development, as well as use of resources in a complex and uncertain environment (Ranyard, 1997). Established companies have been adversely affected by bad decisions made by strategic managers. Cognitive biases are some of the main factors that lead to making bad decisions. When these biases creep into decision making process especially in strategic management, the managers are bound to make under estimations in planning and thus making it impossible to meet the objectives of the company. Following the seven steps of decision making, prevents entry of cognitive biases in decision making and thus making rational decision. Rational decisions in turn lead to excellent outcomes that make a company overcome any foreseen threats and soar into greater heights of success. If cognitive bias is not avoided in all the steps of strategic decision making, the company may face detrimental consequences and even close down business completely. Strategic managers may be required to make urgent decision in responding to a problem. In such a situation, the managers may collect facts that support particular conclusions but ignore other facts that support different conclusions. Alternatively, they may prematurely terminate search for facts and settle for the first choice that looks like may work. Where managers are required to make urgent decisions, it is important to explore all possible alternatives and look for information that would help to make rational decisions. Hill (2009) confirms the fact that, in the event strategic managers fail to use information available effectively, even the best designed strategic planning systems will fail to produce the desired results. Bias is known to occur in every level of decision making from individual, collective to corporate levels. However, in this research outline we will only look at cognitive bias in strategic decision-making in companies. All companies play important roles to their customers and employees and hence need to stay afloat. It is therefore important to avoid cognitive biases in strategic decision making. This is because they have been found to lead to negative outcomes of strategic plans for companies and cause it to close down.
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Definition of terms
1. Cognitive bias is a pattern of deviation in judgement that occurs in specific situations.
2. Strategic management is field in business dealing with major planned and growing enterprises taken by strategic managers on behalf of owners of the company, involving utilization of resources to increase the performance of companies in their external environment.
3. Decision making is the mental processes (cognitive process) resulting in the selection of a course of action among several alternatives.
This research will deal with variables such as, utilization of formal training in decision making, ability to make decisions mistakes made during decision making, and causes of the mistakes. Mistakes made in decision making in this case will mean cognitive bias. The mistakes made in decision making give an impression of the ability of decision making. The quality of decision making will tell a lot on the amount and standard of training that decision makers receive. Training on decision making may reduce incidents of biased decisions.
The study will be a type of qualitative research. Data will be collected through interview of the respondents. The respondents in this research will be strategic managers of selected companies. The research hypothesizes a positive relationship between formal training and reduction of bias in strategic decision- making.
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Failures in decision making mainly occur not because the decision maker was weak-minded or inexperienced, but because he invested his energy poorly across all alternative decision he had to make. It takes experience and willingness to review past mistakes and learn from them to make good decisions. Berkun reports that although different types of trainings can be done to develop decision making skills he has never seen or heard of them being core components of any project management (2008). He further continues to say that of the project managers he interviewed few had formal training in decision making and of those who did only few used it often. Klein in his study observed that good decisions by skilled professionals were made on account of four resources: experience, intuition, training and each other. He also observed that the skilled professionals he interviewed rarely have information or time to make those decision methods work. This Research is important in understanding the use of formal training in strategic decision making. The results of the research will help to know whether decision making topic should be part of business degree coursework.
In summary, studies on formal training have revealed contradicting results. Some show that formal training do not help in strategic decision making while others show that formal training in decision making actually reduce bias in strategic decision making. This means there is need for more research on the importance of formal training in decision making as well as its role in tackling failures in decision making. The research is important in testing the feasibility of introducing decision making topic in business degree.