QUANTITATIVE SCHOOL AND DECISION THEORY
SCHOOL; THE MEETING POINT
DEEDENWII,
BARITURE NEELE
(ND,
D.CL)
ABSTRACT
This
work tends to examine quantitative school and decision theory; its meeting
point. The application of both quantitative and decision theory is very
essential in managerial decision-making for efficient and effective use of
available resources for the growth and development of the organisation. If the
two different management functional levels (executive and operative) in any
organisation are unfamiliar with the various techniques, this might impact
negatively on the decision-making process of the organisation and subsequently,
its competitiveness. Therefore, it is pertinent for managers to enhance their
decision-making competence through experiential and scientific knowledge
acquisition. This will ensure a seamless decision making process, effective
communication mechanism and efficient use of resources by the organisation.
KEY WORDS: Quantitative
School, Decision Theory
Introduction
In
the business world, in practically every aspect of daily living, quantitative
techniques are used to assist in decision making. In order to work effectively
in a modern business organisation, whether the organisation is a private
commercial company, a government agency, a state industry or whatever, managers
must be able to use quantitative techniques in a confident and reliable manner.
Accountants make decisions based on the information relating to the financial
state of organization. Economists make decision based on the information
relating to the economic framework in which the organization operates.
Marketing staff make decisions based on customer response to product and design
(Brown,
2011).
Personnel
managers make decisions based on the information relating to the levels of
employment in the organization, and so on. Such information is increasingly
quantitative and it is apparent that managers need a working knowledge of the
procedures and techniques appropriate for analyzing and evaluating such
information (Mann 2006). Such analysis and
certainly the business evaluation cannot be delegated to the specialist statistician
or mathematicians, who are skillful though they might be at sophisticated
numerical analysis, will frequently have little overall understanding of the
business relevance of such analysis (Mallahi, Frynas and
Finlay 2005).
Statement of the Problem
A
common problem these days in various organizations shows itself in excessive
time spent in dealing with short-term crises, namely "putting out
fires." This problem usually results from a lack of long-term planning,
and typically, the absence of a strategic plan. Individual employees and the
organization as a whole live from day to day, never knowing what to expect.
This may result in loss of organizational productivity and effectiveness.
Examples of these short-term crises abound. The firm had to hire employees
without proper vetting and training in order to meet their target, but still failed
to meet the required result. In other companies, lack of planning can produce
other short-term crises. For instance, lack of planning can result in shortages
of salespeople, which may force a company to hire new people and put them to
work almost immediately, sometimes without adequate training. This, in turn,
can contribute to short-term productivity problems due to inexperience of the
new employees. Therefore, effective managers should be conversant with various
managerial tools, and be able to take them into consideration as a prerequisite
for their actions and expectations. The ability to deal effectively with other
people and accomplish work through them will remain a fundamental ingredient in
the management process (Foxley 2000).
This
is especially true where relatively complex problems are undertaken by
managerial teams. Human relations skills are certainly necessary; however, they
may not be sufficient in managing complex situations. Technical competence is
vital for various tasks. Cost analysis is involved in such diverse areas as
product costing, budgeting, purchasing, and insurance, planning, and
determining the amount and types of remuneration for employees. The use of
quantitative and qualitative methods in evaluating and planning of business
related functions will certainly become ubiquitous to organizational success.
Great ideas and hard work are vital.
Purpose of the Study
The
main purpose of the study is examined quantitative school and decision theory
school; the meeting point. Specifically other objectives are;
1.
To determine the relationship between
Quantitative School and Decision Theory School.
2.
To determine the meeting point of
Quantitative School and Decision Theory School.
Research Questions
The
following research questions are;
1.
Is there relationship between Quantitative
School and Decision Theory School?
2.
Is there meeting point of Quantitative School
and Decision Theory School.
Significance of the Study
The study
would be beneficial to organization as it would enhance policy formulation as
regard decision making in an organization. The study would also be beneficial
to the general public, as it will educate them on the formulation of policies.
The project
work will also contribute to the existing knowledge on organizational
Management. The study will be a useful material to incoming students who may
wish to use this study as a reference material to undertake their own extended
research work.
Scope of the study
This
study tends to examine quantitative school and decision theory school; the
meeting point. It helps to bring about organizational
productivity, as the growth of Nigeria economy. Hence, this study covers all
business organization in Nigeria.
Limitations of the study
The researcher met with a lot of constraints which
includes that of; time, attitude of respondents and financial barriers which
made it difficult to collect data needed for this study. The attitude of the
respondents was a constraint because of the general tendency for people to hide
their feelings for fear of being victimized.
Also the study is constraint with limitation arising from
inadequate material on the subject matter as well as inadequate time due to the
inability of the writer to combined lectures with this extended essay, adequate
finance is also a great limitation to this extended project work.
Definition of Terms
Quantitative School
The quantitative approach to management involves the use of
quantitative techniques, such as statistics, information models, and computer simulations,
to improve decision making.
Operations Management
Operations management is the function, or field of
expertise, that is primarily responsible for managing the production and
delivery of an organisation’s products and services.
Management Information System (MIS):
MIS is the field of management that focuses on designing
and implementing computer-based information systems for use by management.”
Decision Theory
The
decision theory approach concentrates on the rational decisions theory, which
refers to the selection of a suitable course of action from various possible
alternatives.
REVIEW
OF RELATED LITERATURE
Conceptual
Overview: Quantitative School
During World War II, mathematicians,
physicists, and other scientists joined together to solve military problems.
The quantitative school of management is a result of the research conducted
during World War II. Ehlers and Lazenby (2007). The quantitative approach to management involves the use of
quantitative techniques, such as statistics, information models, and computer
simulations, to improve decision making. This school consists of several
branches, described in the following sections.
This theory views management as
a system of mathematical models and logical processes. It was developed by W.C.
Churchman & others. It focused on findings right answers to the managerial
problems. It developed mathematical symbols to describe managerial problems. It
helped in systematizing management thinking and lent a certain measure of
precision to management.
Quantitative theory include methods
or tools, which focus on objective measurement, and analyzing numbers in order
to draw conclusion about given problems .It is scientific method or technique
used by the business world for problem solving and decision-making. In simple
words, these are bunch of those methods and techniques, which provide us a
decision (Cainta 2010).
The
quantitative school focuses on improving decision making via the application of
quantitative techniques. Its roots can be traced back to scientific management.
The management science school
emerged to treat the problems associated with global warfare. Today, this view
encourages managers to use mathematics, statistics, and other quantitative
techniques to make management decisions.
v Managers can use computer models to
figure out the best way to do something saving both money and time. Managers
use several science applications.
v Mathematical forecasting helps make
projections that are useful in the planning process.
v Inventory modeling helps control
inventories by mathematically establishing how and when to order a product.
v Queuing theory helps allocate
service personnel or workstations to minimize customer waiting and service
cost.
Functions of Quantitative Theory
The following are the important
reasons or functions of Quantitative techniques
1. To facilitate the decision making
process.
2. To provide tools for scientific
research.
3. To select an appropriate
strategy.
4. To help in reduction of cost.
5. To have proper deployment of
resources.
6. To help in minimizing the time
required for completing the task.
Branches of Quantitative Theory of
Management
Management Science
Management scienc.e is an approach that aims
at increasing decision effectiveness through the use of sophisticated
mathematical models and statistical methods.”
According to Nuku, (2007) “The
Quantitative School, which is also called Management Science School, consists
of those theorists who see management as a body of quantitative tools and
methodologies designed to aid today’s manager in making the complex decisions
related to operations and productions.”
According to Birnbaum (2008), Management
science also known as operations research uses mathematical models such as
linear programming, PERT, CPM, games theory, probability, sampling theory,
capital budgeting, financial structure theories and symbols to solve
organisational problems.
Whenever management has a problem, it calls a
team of experts from relevant disciplines which analyses business problems and
frames a mathematical model by collecting the relevant data (like cost of
machine, cost of raw material, selling price of the product etc.) and tries to
maximise the output and minimise the cost, Computers have simplified
application of these models to deal with various problem-solving situations. By
changing values of variables in the model, different equations can be solved
through computers and the OR team can find the effect of each change on the
dependent variable to arrive at the optimum and rational solution to managerial
problems (Anderson, Sweeney, and Williams 2004). Management
science and operations research are often considered indistinguishable. While
operations research tends to focus on formulation and manipulation of
mathematical models for common operational processes, management science tends
to focus on the use of models in the practice of management.”
Operations Management
Operations management is the function, or
field of expertise, that is primarily responsible for managing the production
and delivery of an organisation’s products and services. Agrawal
et al (2010). In operations
management, people use quantitative techniques of forecasting, inventory
analysis, statistical quality control methods, networking models etc. in areas
such as inventory management, production planning, designing the production
process, purchasing raw materials, storing and selling the final products and
similar areas in manufacturing units.
Management Information System (MIS):
MIS is the field of management that focuses
on designing and implementing computer-based information systems for use by
management.” Large amount of information is quickly processed (conversion of
raw data into useful information) to make useful business decisions (Kadalie,
2006).
Positive Attributes of Quantitative Theory
Some of the
positive attributes of this theory are:
1.
It establishes relationships amongst
quantifiable variables of decision-making situations and facilitates
disciplined thinking.
2.
Mathematical models help to derive precise
and accurate results by analysing complex statistical data.
3.
This approach is useful in areas of planning
and control where data is available in quantitative terms. Decisions are based
on data and logic rather than intuition and judgment.
4. Computers
have facilitated analysis of almost every variable that affects the workplace
that might otherwise have been overlooked.
Decision Theory School
The decision theory approach concentrates on
the rational decisions theory, which refers to the selection of a suitable
course of action from various possible alternatives. This approach may deal
with the decisions itself, with the person or organizational group who makes
the decision or with an analysis of the decision process (Gherguţ,
et al 2008).
Herbert A Simon and James March are the pioneers of this school.
The concentrated on rational decision-making, selecting from among possible
alternatives of a course of action or policy. The approach of this school of
opinion is concerned with the persons or organizational groups making the
decision or with the analysis of the decision-making process. Attempt is also
made in this theory to cover the social and psychological aspects and
environment of the decisions and decision-makers. By
expanding the viewpoint well beyond the process of evaluating alternatives,
many people use the theory to examine the nature of organizational structure,
the psychological and social reactions of individuals and groups and analysis
of value considerations with respect to goals, communication networks and
incentives (Dewey, 2007).
The scientific approach to
decision making involves some of the following factors:
1.
Defining the problem
2.
Collecting all relevant information
3.
Developing alternatives-
4.
Examining all the alternatives and the
solutions
5.
Testing the solutions, (if you can make this
possible)
6.
Selecting a course of action
7.
Implementing the action.
8.
Evaluating the results of the action
Theoretical Overview: Contingency Approach
The contingency approach recognizes
that problems can be categorized in a number of different ways. A
well-structured problem has identifiable procedures for its resolution namely,
the problem, when confronted, has a known methodology to resolve it. Mintzberg
et al. (1983) have stated that an illdefined problem involves a task requiring
decision processes that have not been encountered in quite the same form and for
which no predetermined and explicit set of ordered responses exists. The contingency approach led theorists to
differentiate between programmed decisions to handle well-structured problems
by providing routine and repetitive procedures and non-programmed decisions to
handle a problem requiring a unique solution. Rules and policies predominate in
programmed decisions thereby providing managers with a high degree of certainty
about the appropriateness of the solution. In contrast, non-programmed decisions
bring managers a high degree of uncertainty and therefore risk. The problem
therefore requires both qualitative and quantitative methodologies to
reduce the risk.
When a manager solves a problem in isolation the risk is higher than
when a manager enrols others to assist in contributing to the solution. The
risk may be reduced by a factor associated with the increased number of people
who participate in the problem-solving. This is why some managers prefer to
solve problems in a group or team.
Empirical Framework
Gaurav and Khalil (2017) investigated
the Role of Quantitative Techniques in Business and Management. The objective
of this paper is to discuss the various quantitative techniques and methods
used in managerial decisions. The study was descriptive and
qualitative in nature and relied primarily on reviewing secondary information
sources such as journal articles, books, conference paper, and internet data
and analyzing to draw comparisons. The paper examined the characteristics of
some classical, neo-classical and contemporary management theories with and
highlighted their enduring contributions to contemporary management practice.
Quantitative techniques are very
powerful medium through which we solve uncertainty in decision making and enhance
projectability and efficiency in the business.
Research
Methodology
The
research was based on an exploratory method. Exploratory studies are typically
conducted to satisfy the researchers‟ curiosity and desire for better
understanding; to test the feasibility of undertaking more extensive studies;
to develop the method to be employed in any subsequent study; to explicate the
central concepts and constructs of a study; to determine priority for future
research; and to develop a new assumptions about an existing phenomenon.
In
their view, Selltiz emphasize three methods by means of which exploratory
research may be conducted, namely a review of related literatures; a survey of
people who have particular experience of the problem to be studied; and an
analysis of „insight stimulating‟ examples. Exploratory studies usually lead to
insight and comprehension rather than the collection of detailed, accurate and
replicable data. Since this research intends to explore a wider phenomenon, it
was reasonable to adopt the exploratory methods. It was necessary to follow
open and flexible research strategies and to utilized methods such as detailed
literature reviews, pertinent cases and expert views, which lead to insight and
comprehension. Exploratory method was
adopted because the paper is a non-empirical study. Being a non-empirical
study, the research placed more emphasis on conceptual analysis and theory
building. Theoretical literature on the quantitative theory and decision theory
as relevant tools for decision-making was analysed, and supported by the perspective
(authors‟ viewpoint).
Sources and Method of
Data Collection
In
this study both the primary and secondary data were used. Secondary data was
used in establishing chronological framework of this research work. The
questionnaire was design in a way that respondent could easily provide adequate
answer in the study. As a result of this, the research instrument used for the
collection of primary data needed for the study was mainly questionnaire
administration.
Data Analytical Method
The
questionnaire was design in a way that respondent could easily provide adequate
answer in the study. The data were analyzed using simple descriptive method
stated in tables and expressed in percentage.
Summary
This work tends to examine quantitative school and
decision theory; its meeting point. The application of both quaantitative and decision
theory is very essential in managerial decision-making for efficient and
effective use of available resources for the growth and development of the
organisation. If the two different management functional levels (executive and
operative) in any organisation are unfamiliar with the various techniques, this
might impact negatively on the decision-making process of the organisation and
subsequently, its competitiveness. Therefore, it is pertinent for managers to
enhance their decision-making competence through experiential and scientific
knowledge acquisition. This will ensure a seamless decision making process,
effective communication mechanism and efficient use of resources by the
organisation.
Conclusion
Effective
decision-making depends on many factors. Consequently, there is need to have a dynamic
decision making process that aligns with scientific decision-making procedures.
Beside decision-makers experience, talent and quality, the use of suitable
decision-making tools is also of significant importance. Therefore, managers
should think about the three key contingency variables of environment,
technology and people, before making a decision. Management requires the
control of human resources, environment and material resources (technology) to
achieve optimum objective. Management in the 21st century has become more
complex owing to globalization and technological development. Stakeholders are
now more aware of their right and privileges, international laws are now
superseding national/local laws and competition has now become intense.
Therefore, effective and efficient decision-making by managers will guarantee a
competitive edge for their organisations. This can only be achieved through the
proper use of the appropriate decision-making tools. Because management is both
an art and science, it has now become imperative that managers should equip
themselves with decision-making aptitude.
Recommendations
Based on the foregoing, the following
recommendations are worth pondering:
1. For an effective and efficient decision-making
process, managers in various organizations need to not only have human
relations skills but also, technical competencies.
2. Management team in organizations should inculcate
the use of managerial science, statistics and quantitative approaches for
planning, forecasting, cost analysis and evaluation, to ensure optimization of
both human and material resources in their organizations.
3. Behavioural methods and quantitative techniques in
organizations are closely related, and should be applied to problem-solving
because they are essential productivity tools.
4. There should be an emphasis on the use of the
different managerial techniques as part of the corporate strategic planning of
organisations within a global and highly competitive context.
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