Managing under uncertainty Essay Example | Topics and Well Written Essays - 1500 words

Managing under uncertainty - Essay Example This contributes to the different performances of companies that deal with products or services in a similar field. However, urgencies, as well as external and internal conditions influence the decision making of the management in organizations, whose effect could be unanticipated. Having been in operation for slightly more than 10 years, a growing business was soon headed for failure. Call it RIMPA for confidential purposes; it was established to offer transportation services for companies dealing with large cargo. Eventually, its operating commercial vehicles were hired by government companies, and beer and bottling firms, let alone the private and small scale firms. The company also run parallel businesses in agriculture and had various investments within the country. In the hard economic times of the 2007 to 2008 global recession, RIMPA had complex problems with its management branches. What later followed was questionable resource depletion and bankruptcy in some branches, since they were managed separately. The problems called for quick remedy to prevent further loss and keep the business operational. Each branch had its manager and a team of advisors as its board, then lower the operational managers, then the employees. In the general context, the top executives of the general company were separate, but involved with decisions at the branch level. Various factors were not adding up, from accounting, management, to performances; and the top executives had to step in to make the decisions. Due to the deteriorated performances and losses in three branches, they were offered for sale to minimize the loss. The managers had 3 months termination notices for what the executives believed was lost trust and management discrepancies. It was evident that the aim of their decision was to cut down costs that were already spreading to the performing branches. Initially, before their grand decision, there were some efforts to bail them out, which were initiated by the b ranches management though never successful. In the long run, the grand decision managed to save the little left, not to mention that the sales of the branches were at a loss. A good number of employees were laid off, but that ended up in court, as they sought for compensation. The whole situation affected the rest of the branches. The employees’ salaries were shrunk by 18 percent, from the middle managers to the least employees. As though never enough, the top management decided to increase the cost of their services by 12 % to maintain profits. In less than 2 months, most employees had resigned for better paying jobs in other companies. The company’s clients had also reduced their requests for services, since they opted for alternative means to transport their goods. Explaining the Decision using Bounded Rationality Theory The implications of a decision can be difficult to detect in the beginning. Most of them unfold with time, or even develop into a complex problem i f not well controlled. It is obvious that most people would feel that the decisions made in RIMPA were probably out of scope. However, placed in the situation and with similar constraints, making such decisions would have been inevitable. For this reason, the decision behavior of the top executives must have been affected by their limited cognitive capabilities. The decision behavior of humans cannot conform to the idea of full rationality because they lack unlimited cognitive capabilities (Selten, 1999). Hence, it was reasonable for the top executives